Any French people who have seen the film “La Grande Vadrouille” will have in mind this song from “No, No, Nanette”, an American comedy produced on Broadway in 1925. Despite having made it known in June 2016 that they want to leave the European Union, the British just don’t seem to want to give up taking tea with their European partners.
After three votes this week, the British MPs have declared themselves in favour of pushing back the March 29th Brexit date, in the hope of securing new concessions. This uncertainty perpetuates the same lack of confidence in European equities (outflows of $4.6 billion this week), whilst at the same time, American stocks recorded their highest weekly inflows for a year ($25.5 billion). And the equity markets are continuing to rise resolutely, as they have done since the beginning of the year, registering annual highs. This is all the more puzzling in Europe, where pessimism is at its peak.
Yet, the recession has not materialized. The ECB’s announcements have done nothing to change investors’ views on the eurozone, which remains an area of growth and inflation, albeit weak, but one with healthy public accounts. The publication of corporate results still reflects the slowdown seen in the last quarter of 2018. Brexit will continue to fuel a lack of confidence in continental Europe, as the result of this referendum was considered to hail the beginning of the breakup of Europe. But when you think about it, it has often been the case throughout history that Britain has, in reality, been on the periphery of the continent. Plus, Great Britain is not part of the same monetary area.
The eurozone has demonstrated its resilience after the incidents with Greece, Portugal and Ireland. The uncertainty about how (or why) they are leaving us might tempt European leaders to borrow one of the lyrics of this song and apply it to Europe, telling our British partners, “darling, this place is lovely oasis”!
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