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Out of the Box: The Roman Legion is Back

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“If you must break the law, do it to seize power: in all other cases observe it.”
-Julius Caesar

During recent events in Verona and Rome, Matteo Salvini went back on the offensive. He stated that the League and the Five Star Movement would deliver on the package of stimulus measures they incorporated into the 2019 budget. He said they were going to do this even if the latest batch of European Commission projections suggest that the deficit will be much wider than initially anticipated.

“If we need to break some limits, like the 3% or the 130-140%, we’ll go ahead,” Salvini told reporters in Verona, in a reference to their 132% debt to GDP ratio. “Until unemployment is halved in Italy, until we reach 5%, we’ll spend everything that we have to spend. If someone in Brussels complains, that’s not our problem,” Salvini said. He added that the bloc’s fiscal rules are “outdated, old and imposed without any sense by the EU. “I’m sick of the Europe which says ‘no,’ which wants everyone to have insecure jobs and to retire at the age of 97 to save money,” Salvini said. “Let Merkel, Soros and Juncker retire at 97.”

Now, the seizing of power is a tricky thing. This is especially true without armaments. Yet, no one, and certainly not me, is expecting any type of gunfire and it will be the ballot boxes, commencing with the May 23 European Union elections, where the transfer of power will take place. Britain is voting and Nigel Farge, and his group of Brexit followers, are leading the polls in the UK. Italy is voting and Salvini’s crowd leads the pack. Then you have Poland and Hungary and even in France, Ms. Le Pen’s group is neck and neck with the Macron people.

In my estimation, before all is said and done, Germany and France are going to lose their grip on Europe. Germany fought two World Wars trying to gain control of Europe and then finally took over the helm, through economics. Now, however, after a twenty-year run, I think that Germany is going to lose her position as the populists, nationalists, surge in the elections and either take a significant minority or a majority of the EU votes.

Game over!

“Every new beginning comes from some other beginning’s end.”
-Marcus Annaeus Seneca

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 seats in the UK, as establishment parties are forecast to lose their majority across the European Union. The vote takes place in the UK on Thursday 23 May, with the Europe-wide results expected on the evening of Sunday 26 May.

These are expected to see establishment parties across the continent suffer, both at the hands of the populist-Right as well as resurgent liberal parties. 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.”

I cannot emphasize too much just how important this election is for Europe. I think many people, and financial institutions, just do not have a realistic handle on what is going on here. Power may well change hands and it may be “out with the old and in with the new” and the European Union may never be the same. I continue to state that unless you have a mandate for European investing that no money should be invested there at present. The amount of “Risk” here looms large and there may even be new rules imposed on the ECB, and its mandate, in the process.

Besides the “Underlying Assumption, that none of this will happen there is also the “Underlying Assumption” that the ECB will save the day. I am not a buyer of either assumption as Italy, and her partners, are about to drive their chariots through the parking lots in Brussels. The Roman Legion is back and it will be the Huns who will take it on the nose.

“The universe is transformation: life is opinion.”
-Marcus Aurelius

It could be Salvini soon but it will be Brussels and not Rome:

Mark J. Grant
Chief Global Strategist, Fixed Income
Managing Director
B. Riley FBR Inc.
Mgrant69@Bloomberg.net
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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