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Populist Politics: What's in Store for Europe?

Our European markets expert explains why any political surprises are likely to be on the “no” side

by Alexandra Lienhard
Updated: November 30, 2016

Brian Whitmer discusses the social mood landscape across Europe and explains how social mood will impact the upcoming European elections.

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[Editor's note: The text version of this interview is below.]

Alexandra Lienhard: I'm Alexandra Lienhard for ElliottWaveTV, and today I have Brian Whimter joining me. Brian is the editor of Elliott Wave International's European Financial Forecast and contributes to the European section of the monthly Global Market Perspective. Hi Brian, good to see you again.

Brian Whitmer: Hey, Alex.

Alexandra: So, Italy is front and center this weekend. Why is that and what do viewers need to know about what's going on over there?

Brian: Italy is front and center because they've got an election coming up and it's really kicking off this voting season, the election season that is going to last throughout 2017. Italian Prime Minister [Matteo] Renzi has put forth a referendum, it's been described as the most ambitious government overhaul in decades. Depending on whom you talk to, it's either the best thing for Italians, or the worst thing for Italians. I think the details of the plan don't really matter nearly as much as the mood of the voters. Italians are viewing this referendum as a vote between the status quo, between government as usual, and the anti-establishment, this populous wave that has been really sweeping through Europe for years. So, socionomically, this is a pretty simple thing. It's a vote for establishment versus anti-establishment.

Alexandra: Now, you mention the mood of the voters -- so, generally speaking, how is social mood in Italy? Both short and long-term?

Brian: The MIB Index, that's the main stock market in Italy, that's our best sociometer, is down 60% since its all-time high way back in 2000. And it's also down 30% since a countertrend high last year. So, mood in Italy is trending toward the negative on both a near-term basis and long-term basis.

Alexandra: Now, looking at the polls ahead of this upcoming election, most major polls this year have been dead wrong. So, it begs the question, in your mind, do they have any value whatsoever?

Brian: Well, the polls in Italy also lean toward a win for the "no" camp, but you're right, the pollsters have had a horrible track record this year. The successful Brexit vote, all the opinion polls did not predict that. And Trump's win over Clinton this month, none of the polls got that one right, either. In both of those cases, notice that the surprise was aligned with a negative mood trend, with what we would expect during a bear market. The political outsider, in the case of Trump, and political disunion, in the case of the Brexit vote. In Italy now, the polls are aligned with that negative mood trend. So, I think if a surprise does happen in Italy, it may be in terms of a wider margin of victory for the "no'" camp than what's expected.

Alexandra: Now, looking beyond Italy, you've been saying for quite some time now that it's not just Italy that we need to be looking at, but there's quite a lot coming up across Europe over the next 6-12 months. S,o Brian, what should we be keeping our eye on?

Brian: Well, keep an eye on Austria. Austrians will vote on December 4 in a re-run of the presidential election from this past May, and they have a very good chance of electing a far-right president. Beyond that, the Dutch general elections in March of next year, there we have numerous Euro-skeptic parties that are vying for power. After that, French general elections are in April and May of next year. That is shaping up to be a contest between [Francois] Fillon, the conservative candidate, and [Marine] Le Pen, the far-right leader of the national front. And finally, we have general elections in Germany in the fall of next year. [Angela] Merkel has just announced that she will seek a fourth term as Chancellor -- and here, if the incumbents have a chance to sort of mount a counter offensive against this populist wave, I think Germany is going to be the place to do it.

Alexandra: Thanks, Brian, as always it's been great.

Brian Whitmer edits the European section of Global Market Perspective -- the monthly 50-page publication that gives you in-depth, longer-term views of European, U.S., and Asia-Pacific stock indexes. Now is the time to learn about worldwide investment opportunities. Visit the link below to learn how you can subscribe to EWI's Global Market Perspective.

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