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Out of the Box: Europe — All Along the Watchtower

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There are many here among us who feel that life is but a joke
But you and I, we’ve been through that, and this is not our fate
So let us not talk falsely now, the hour is getting late
-Bob Dylan

I am standing on the Watchtower now. I am peering intently at the European election, which commences two days from now, on May 23, and ends on May 26. I contend that the past is about to be broken, as Germany and France lose their hold on the European construct. What has been for 20 years will be no longer, and I believe that the controlling group, the German/France alliance, is about to be booted out of power. I have no political position here. I am just observing the events and the Polls.

Britain’s Telegraph states, “The latest polling for the European Parliament elections shows that Nigel Farage’s Brexit Party is likely to gain the most votes in the UK, as establishment parties are forecast to lose their majority across the European Union…The result is likely to be a more fragmented European Parliament, with the centre-Right EPP and centre-Left S&D forecast to lose their combined majority.”

Italy’s Deputy Prime Minister, Matteo Salvini, has said that European Union rules are creating “full-on unemployment” and he wants to go back to pre-Maastricht Treaty rules. “Those who want to save Europe are those that are sold as the anti-Europeans. I feel more pro-European than the pro-Europeans,” Salvini said in Milan on Friday. “I would return to the pre Maastricht with more normal fiscal economic rules where we spoke of well-being and full employment. The rules imposed by Brussels are creating full-on unemployment,” Salvini said.

Salvini held a major rally on Saturday of European nationalists, including France’s Marine Le Pen, and Holland’s Geert Wilders. Around 100,000 people attended the event in Milan’s Duomo Square. “The political elites in Brussels cannot be trusted. They want to impose their orders on us. They want to take away our identity and our security,” Wilders claimed at the rally. Calling for “no more immigration,” Wilders praised his friend Salvini as an “example for all of us” and said “Europe needs more Salvinis.”

Salvini claimed he now has a network of European alliances “that we never had before in the past” and listed parties in France, Austria, Sweden, Finland, Hungary, Czech Republic, the UK and Poland among his allies. “We have an idea of Europe founded on work, rights, life, safety, the exact opposite of the Europe founded on finance, unemployment, mass immigration, that we have suffered over these years,” Salvini stated.

“It is an historic moment important enough to free the continent from the illegal occupation organized by Brussels for many years,” Salvini proclaimed. He accused European leaders including German Chancellor Angela Merkel, French President Emmanuel Macron and EU Commission President Jean-Claude Juncker, of “betraying Europe by constructing a Europe of finance and uncontrolled immigration.”

Speaking to reporters before the rally, France’s Le Pen said the nationalist, populist, movement was united “in our conception of cooperation in Europe, our shared desire to protect our citizens, our common refusal to see our country being subjected to the submergence of migration. The fundamental fight we are waging is a commitment against totalitarianism, globalization and Islamism, to which the European Union is responding, respectively, through accession and complacency,” she said.

An analysis by the London-based Teneo consultancy forecasts that Europe’s two traditional center-right and center-left political groups will be weakened in the May vote, falling short of the 50% threshold of support for the first time. If they are correct and if the nationalist, populists, take control of the EU legislature, with a majority, then you may expect havoc as every policy making body in the EU gets upended, as a result of these elections.

Many people and institutions see the tariff war with China as the most significant event of the moment. I do not. I see the possible outcome of the forthcoming EU elections to be the main issue to be concerned about and I see HUGE Risk and I advise taking as much money out of Europe as possible now, as part of my “Preservation of Capital” Rules. Even if the nationalist groups do not win at absolute majority, they will have such a sizable minority, in my opinion, that Germany and France may find themselves blocked on many important issues.

“The outcome of the EU election could cause the biggest revolution in our political system since the universal franchise.”

-Nigel Farage

Mark J. Grant
Chief Global Strategist, Fixed Income
Managing Director
B. Riley FBR Inc.
U.S. 954-468-2366

Information herein is for general use; is not unbiased/impartial; is current at publication date, subject to change; may be from third parties; and may not be accurate or complete. Opinions are the Author’s, not B. Riley FBR, Inc., or their respective affiliates or subsidiaries. This is not a research report or solicitation or recommendation to buy/sell the subject securities. Investment factors are not fully addressed herein. B. Riley FBR Inc. and their affiliates may have a proprietary position in the subject securities.

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