Higher support for the euro after the Brexit vote
Pernille Bomholdt Henneberg
Senior Analyst
+45 45 13 20 21/+44 20 7410 8157
[email protected]
2 January 2017
Investment Research
www.danskemarketsequities.com
Important disclosures and certifications are contained from page 10 of this report.
Higher support for the euro as a single currency after Brexit vote
• The European Commission’s Eurobarometer for autumn 2016 showed higher support for the
euro as a single currency. Support was at 70% in the euro area, which equals the record
highs reached in autumn 2004, spring 2007 and autumn 2008.
• On the other hand, optimism about the future of the EU was unchanged at 50%. The figure
was at 58% in spring 2015 and the 50% level is the lowest since the debt crisis in 2011-12.
• Immigration was still seen as the most important issue facing the EU followed by terrorism,
but both were considered slightly less important than in the spring 2016 survey.
• Across countries, especially Italy and France remained countries with low optimism about
the EU. In Italy, the ratio for the common currency was 53% – below the average in both the
euro area and the EU and EU optimism weakened to 42% – the lowest since the debt crisis.
• In France, optimism about the EU also remained low at 41%, but the ratio for the euro as a
common currency was only a little weaker and stayed at 68%.
• In Germany, on the other hand, support for the euro as a common currency jumped by 8pp to
81%, while optimism about the future of the EU increased to 50%, having declined sharply to
below crisis levels in autumn 2015.
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Higher support for the euro as a single currency after Brexit vote
Higher support for the euro after Brexit vote:
The European Commission’s autumn 2016
Eurobarometer survey showed higher
support for the euro as a common currency.
Of people in the euro area, 70% support the
euro as a single currency. This equals the
record highs reached in autumn 2004,
spring 2007 and autumn 2008.
The survey was carried out between 3-16
November and is the first since the UK’s vote
to leave the EU. There is a risk that upcoming
Brexit negotiations between the UK and EU
as well as the UK leaving the EU are affecting
sentiment and optimism about the EU.
Of people in the euro area, 70% support the
euro as a common currency
90%
80%
70%
60%
IE
85% DE Ratio being for the euro as a common currency
November 2016
81% FI NL
78%77% BE PT
76%
74% SP EA
71%70% FR GR
68%68%
AT
62% EU
58%
IT
53%
50%
40%
DK
30% SE
27% UK
24%
30%
20%
10%
0%
Share being for one single currency, the euro
Among the four biggest euro area countries
the support for the euro as a common
currency was 81% in Germany (+8pp), 71%
in Spain (+3pp), 68% in France (-2pp) but
only 53% in Italy (-1pp).
Source: European Commission Eurobarometer, Danske Bank Markets
2
Higher support for the euro as a single currency after Brexit vote
Ratio for the euro equalled record highs
80%
In Germany, higher ratio for the euro
Ratio being for the euro as a common currency
Ratio being for the euro as a common currency
90%
70%
80%
70%
60%
60%
IE
Spring 2016 compared with Autumn 2016
+2pp DE
+8pp FI NL
+2pp0pp BE
PT
Spring 2016
-1pp
+5pp SP EA
Autumn 2016
+3pp+2pp FR GR AT
-2pp+6pp-7pp
EU
+3pp
50%
IT
-1pp
50%
40%
40%
DK
+1pp SE
+2pp UK
+7pp
30%
30%
20%
20%
10%
0%
For (Euro area)
For (EU)
Against (EU)
Source: European Commssion Eurobarometer, Danske Bank Markets
Against (Euro area)
Ratio being for one single currency, the euro
Source: European Commission Eurobarometer, Danske Bank Markets
3
Optimism about the future of the EU remained low
Optimism about EU still at debt crisis levels:
At an EU level, optimism about the future of
the EU remained unchanged at 50% in
autumn 2016. Optimism was at 58% in
spring 2015 and the 50% level is the lowest
level since the debt crisis in 2011-12.
Optimism in Germany improved in autumn 16
80%
Optimistic about the future of the EU
75%
70%
65%
60%
In Germany, optimism about the EU’s future
improved in the autumn 2016 survey after
declining sharply to below crisis levels in
autumn 2015. In France and Italy, future EU
optimism weakened to 41% and 42%
respectively and in Italy, the optimism is at
the lowest level since the debt crisis.
Immigration is still seen as the most
important issue facing the EU followed by
terrorism, but both were considered slightly
less important than in the spring 2016
survey (see page 5).
55%
50%
45%
40%
35%
30%
2007
2008
EU
2009
DE
2010
2011
FR
2012
IT
2013
SP
2014
2015
IE
2016
UK
Source: European Commission Eurobarometer, Danske Bank Markets
4
Immigration and terrorism were seen as important EU issues
Immigration the most important EU issue
Unemployment most important for countries
Most important issues facing the EU
Most important issues facing the countries
Immigration
Unemployment
Terrorism
Immigration
Economic situation
Economic situation
The member states' public finances
Health and social security
Unemployment
Rising prices/ inflation/ cost of living
EU's influence in the world
Pensions
Crime
Terrorism
Rising prices/ inflation/ cost of living
Crime
Cimate change
Goverment debt
The enviroment
The education system
Taxation
Housing
Autumn 2016
Pensions
Spring 2016
Energy supply
-10
Taxation
10
30
Source: European Commssion Eurobarometer, Danske Bank Markets
Autumn 2016
The environment, clamate and energy
50
Spring 2016
0
5
10
15
20
25
30
35
Source: European Commission Eurobarometer, Danske Bank Markets
5
Two-thirds in the euro area felt like EU citizens
In the euro area, 67% felt like EU citizens
You feel you are a citizen of the EU (%)
High support for free movement of people
Percentage of EU-citizens for the following topics (% - EU)
Free movement of EU citizens
8
LU
92 17
21 21 20 21 22
22
MT
23
24 25 25 26 26 26
82 PT ES FI
PL IE DE
29
SE
79 79 79 78 78 77
30
EE 75 LT DK
32 31
LV SK SI
75
32 34
74 74 73 73 73 BE
NL
71 HU 68
RO EU AT 37 39
69
67 67 66
FR
61 HR 43 46 47
60
48 49
UK
53
55 CZ CY IT
53 53 51 BG
50 GR
47
Common defence and security policy
Common energy policy
Common migration policy
Common foreing policy
A digital single market within EU
Economic and monetary union
LU
MT
PT
ES
FI
PL
IE
DE
EE
SE
LT
DK
LV
SK
SI
BE
HU
NL
RO
EU
AT
FR
HR
UK
CZ
CY
IT
BG
GR
Trade and investment agreement between
US and EU
Total 'Yes'
Total 'No'
Don't know
Source: European Commssion Eurobarometer, Danske Bank Markets
Autumn 2016
Further enlargement of the
EU with more countries
Spring 2016
0
20
40
60
80
100
Source: European Commission Eurobarometer, Danske Bank Markets
6
Political uncertainty will not vanish in 2017
Will EU-sceptic parties acquire some power?
Many political events and risks during 2017
DE: Alternative for Germany
FR: Front national
IT: Five Star
SP: Podemos
NL: Dutch Freedom Party
BE: Vlaams Belang
AT: Austrian Freedom Party
2017
FI: Finland's Finns Party
Dutch general election
before 15 March
GR: Syriza
GR: Golden Dawn
The UK to trigger Article 50
before the end of March
PT: Left Bloc
IE: Sinn Fein
French presidential election
23 April and 7 May
UK: UK Independence Party
SE: Sweden Democrats
German general election
Between 27 Aug and 22 Oct
DK: Danish People's Party
0%
Latest polls (Nov-Dec)
Source: Danske Bank Markets
5%
10%
15%
20%
Last national election
25%
EP 2014
30%
35%
2018
40%
Italian general election
Before 23 May 2018
EP 2009
Source: Danske Bank Markets
7
Political uncertainty has not weakened the economic recovery
Resilient economic and financial sentiment:
The euro area economic recovery has
continued as political uncertainty has not
derailed consumer and business optimism.
High policy uncertainty – no economic impact
Given the limited economic impact of political
events, we expect GDP growth to remain
positive and for the unemployment rate to
continue to decline in 2017.
We forecast investments will contribute
relatively more to economic activity in 2017
as they are supported by accommodative
financing conditions, the synchronised global
rebound and a need to modernise the capital
stock following very weak investments during
the crisis.
Source: Economic Policy Uncertainty, Markit PMI, Danske Bank Markets
8
Political uncertainty has not weakened the economic recovery
Business confidence strengthened in Q4 16
Consumer confidence remains at a high level
Source: Markit PMI, Eurostat, Danske Bank Markets
Source: European Commission, Eurostat, Danske Bank Markets
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Disclosures
This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske Bank’). The author of the research report is Pernille
Bomholdt Henneberg, Senior Analyst.
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