European politics poses threat to medium term growth outlook - ANZ

Analysts at ANZ suggest that European politics is approaching a crossroad as the collapse in support for the established parties that built the EU is intensifying, which may well be reflected in the 2019 European elections with significant implications for how Europe evolves.

Key Quotes

“The failure of the coalition talks in Germany holds few implications for the short term growth outlook. But no clear leadership in Europe’s largest economy means progress towards deeper European integration will be delayed, if not derailed.”

“Progress in implementing structural reforms may also be curtailed by the fracturing political backdrop. That is bad news for medium to longer term growth prospects and would imply that interest rates could stay lower for longer.”

“The political climate also provides an exogenous headwind for the euro and counterweight to the positive influence that strengthening domestic demand has on the single currency.”