The countdown is on: on June 23 the British vote on the withdrawal from the European Union (EU). The possible consequences are hard to imagine, also because it still seems so surreal that the UK could indeed turn its back on Europe. And yet, the danger is real and the EU opponents numerous. No matter how the vote will come out, the British pound will respond accordingly: with exchange rates rising, should the UK stay, and with rates falling, should it opt for an exit.
The refugee problem poses yet another challenge for the EU. It splits the community not only internally (Austria and Hungary), but also in relation to third countries – in particular Turkey. The European negotiators led by Angela Merkel, Martin Schulz and Jean-Claude Juncker – have to eat humble pie and ensnare the Turkish President Recep Tayyip Erdogan. The central issue here is the influx of refugees between Turkey and Greece, more specifically, the open Turkish borders to the EU external border. Streams of refugees coming through Turkey’s northern border to Syria are simply funneled from Turkey via Greece into the European Union, whereby the refugees are bound to endure a dangerous and often very expensive sea voyage. The agreement with Erdogan stipulates repatriation of those refugees back to Turkey, while in return the EU promises to take over all Syrian refugees directly after their crossing the Turkish border. This way the parties hope to run dry the lucrative business for the gangs of traffickers. Another highly controversial service-in-return is abolishing the visa requirement for Turkish nationals entering the European Union.
Following the Brazilian parliament’s vote to impeach the president, Dilma Rousseff, and the senate following suit, Ms. Rousseff has been suspended for half a year from her office and will be temporarily replaced by the vice president, Michel Temer. As an extra perk he will have the honor to open on August 5 the Olympic Games in Rio de Janeiro. The economic implications of this power change are apparent in the Brazilian equity index rising by good 40 percent within the last three months, reflecting expectations of Rousseff’s removal and hopes for the new president to provide much needed impetus to the weakening Brazilian economy. The man at the top will face a trying task, as the intricate system of corruption in Brazil has by now permeated the whole society. When a fish stinks at the head, the rest is likely to be infested as well.
Austria has a new leadership. The office of the federal chancellor as chairman of the government (role equivalent to Angela Merkel’s) has been taken over by Christian Kern (SPÖ, centre-left social democratic party). Alexander Van der Bellen (Green party) has been elected in a knife-edge contest as the new President (role equivalent to Joachim Gauck’s in Germany). Although Austrian presidency is largely ceremonial, the actual influence on policy could be theoretically significantly broader. With Van der Bellen, it is for the first time in the European history, that a president is representing a Green party.
Your Wealth at a Glance.