The nationalist tide may now have peaked.

The Eurozone has dodged the nationalist threat that was risking political and financial stability. The recent election of President Emmanuel Macron in France led a surge in the value of the Euro and European stock values. This election brought to an end the fears in Europe of parties seeking to re-negotiate their membership of the EU and leave the Eurozone.

The nationalist tide may now have peaked as populism did not make the breakthrough in Austria last December, in the Netherlands in March and France in May. The strongest potential threat to the Euro and EU stability is decided. In Germany Chancellor Angela Merkel is expected to gain her four term in office. Only the Five Star Movement in Italy remains a strong political force. Beppe Grillo’s Five Star Movement are ahead in Italian polls by 8% and offer the Italian people their Lira back to run in parallel with the Euro. Markets will react badly to a Five Star win.

While Europe puts the treat of countries other than the UK leaving the EU behind it they can now concentrate on growing their economy. The Eurozone is improving with growth in Europe as good as in the US. Employment rates are growing and core inflation rising.

France’s unemployment rates remains stuck at around 10% compared to 5% in the UK and 4% in Germany. The French economy has grown at half the UK average since 2010. For France to prosper reform is needed over labour flexibility, pension reform and de-regulation. Emmanuel Macron’s challenge will be to turn around the French economy. However, President Macron does not have an established political party behind him and may be undermined in the Assemblée Nationale by the old guard. Any lack of reform and progress will re-open the door to Marine Le Pen.

However, a successful programme of economic reform could provide a welcome boost to European growth. France is the 3rd largest economy in Europe and the 6th largest globally. France is the 3rd biggest UK export market after the USA and Germany so an improvement in Frances fortunes may boost our own.

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