It is unclear whether the European economy is taking another step towards normalisation, or is headed for another “troublesome period”, says Pioneer Investments, citing potential headwinds for the Eurozone.
In a report, titled Spring Headaches, Pioneer Investments identifies a number of potential headwinds currently facing the eurozone and the wider continent, such as Brexit and migration.
Positively, GDP growth was stronger than expected in the first quarter, but the eurozone must grapple with growing political noise surrounding the Brexit referendum scheduled for June, the migrant issue, localised political frictions in Spain, Ireland and Portugal, the Greek question, and banking sector strains.
The firm expects Brexit fears to dominate over the next two months, and notes a ‘leave’ vote would not only have deleterious implications for the UK, but could produce substantial volatility in Europe’s financial markets, and would be a severe blow to the European project. Nonetheless, Pioneer is confident ‘remain’ will prevail.
While Greece remains a concern for many investors, Pioneer believes the Syriza government has taken encouraging steps, and largely fulfilled their obligations as outlined in the repayment agreements reached last summer. A permanent solution may finally be in sight.
Elsewhere, Spain, France and Italy are all obligated by the EU to eradicate their respective deficits, however, Pioneer says this is not only difficult, but also inadvisable in the current environment.
©2016 funds europe
