We're with Carl Tannenbaum, Chief Economist of Northern Trust. Carl, great to see you.
Good to be with you.
So Europe lately seems to be coming apart more than coming together. What's going on?
Well, Europe has been coming together since the end of the Second World War and more forcefully since the creation of the common currency, the euro, in the early 1990s. And for a long time, it was very beneficial for all of the partner countries. But since the financial crisis, economic fortunes have diverged and some are questioning whether having those associations for trade and monetary policy are best for those individual countries.
What do we expect to come out of these Brexit discussions?
The Brexit vote last June was a big shock and set the stage for a very uncertain period ahead. The posture of the United Kingdom towards Europe is likely to change. While they'll try and preserve some of the benefits, they're also trying to make some changes in the free movement of goods and people. It's hard to know exactly what the other side of Europe will tolerate there, and the discussions are likely to be lengthy and very, very complicated.
Do you expect other countries in Europe to follow the example of the United Kingdom?
Well, that will be a very interesting theme to watch this year. We have a string of elections in the core of Europe upcoming. In March, Holland will go to the polls, the French presidential elections are in May, and then Germany will have its elections in October. In all three of those countries, there are significant parties that are questioning their country's participation in the European Union and wanting to modify it. So the outcome of those elections will determine whether the EU and the euro have a future or whether it will all come to an end.
What would be the economic impact if a separatist sentiment wins the day?
Europe is a formidable economic bloc with a population that's bigger than the United States and a size of the economy that's about the same. Working together, they present a united front that can generate a lot of trade activity and a better negotiating position with other countries. If they begin to separate, that power diminishes. Some countries will certainly struggle while others move ahead, and the uncertainty created for all markets worldwide would be something that investors would not find very pleasant.
Carl, thank you for your insights as always.
You're very welcome.