So what are the other European countries that face the greatest increase in political instability following the Brexit plebiscite results? From our value investment perspective much of European credit had already offered little value relative to the high level of net foreign debt in some states and the political impasse that continues to hamper growth. Now with the added uncertainty from antagonistic negotiations, far right (and left) political parties across Europe have been given a boost in confidence and support as has the possibility of other Euro/EU referendums. This further detracts from their appeal for long term value investors, but which states in particular face the most immediate concerns?
The major countries most at risk of political disruption seem to be Netherlands and Austria. The Netherlands (who aptly have received the tag of “Nexit”) has one of the closest ties economic with the UK and will nostalgias the UK as one of their most aligned EU voting allies - who have assisted driving stricter reforms in climate change and other important rulings that are poignant for this lowland country. Opinion polls however still suggest a slight majority against both leaving the EU and against a referendum itself. But such polls with such slim margins were not sufficient for the UK to vote remain. The popular far right “Freedom Party” leader Geert Wilders has pledged to make a similar referendum as one of his campaign policies leading up to Dutch general elections next March. By then they may have the benefit of hindsight over what pains or advantages the UK has managed to garner in its ordeal.
Austria also faces a disenfranchised population who recently nearly voted in the EU’s first far right head of state Norbert Hofer; the Green’s Alexander Van der Bellen pilfered victory with a majority of just 31,000 votes giving him 50.3% of the votes to 49.7%! Hofer still bombasts that they too may call an EU vote within the year though thankfully it is not presently his call. Again opinion polls, at least for now, give the slim majority to the wait-and-see camp.
Also under significant pressure is France where far right National Front leader Marine Le Pen was one of the first people President Francois Hollande met following the UK leave result. She also has promised to hold a referendum should she be elected president. Le Pen should comfortably reach the final round of presidential runoffs but still faces long odds at actually being elected. Though with President Hollande one of the least liked EU leaders (with only 12% approval rating according to YouGov) who even has the left protesting against his (fairly sensible) economic reforms support for the National Front has the potential to grow faster than expected.
Italy and Denmark face similar pressures and most, if not all, EU countries clearly face significant headwinds as the Brexit unfolds. Given all these unpleasantries and competing concerns one can see why the EU has no restrictions on serving David Cameron the cold shoulder.