Europe: Markets surprised by the extent of the seeming nationalist/populist shift - BBH

Research Team at BBH, suggests that the markets have been surprised by the extent of the seeming nationalist/populist shift, first in the UK and then in the US, now investors have turned a jaundiced eye toward Europe.  

Key Quotes

“While the nationalism/populism has altered the course of these two countries, it may be an acid that dissolves the glue that binds Europe together.  Italy's constitutional referendum and the Austrian presidential election in early December seem to be appetizers for the main course, the French presidential election in the spring, where the odds of the National Front winning seem to be rising.”  

“For his part, Italian Prime Minister Renzi has again renewed this threat to resign if the referendum does not pass.  He disdains the possibility of heading a caretaker government, which he says always raises taxes.  The referendum appears to be losing support, and there is already a discussion of likely candidates to replace Renzi.  The Cultural Minister Franceschini and Finance Minister Padoan are being touted.  Whoever it is would be the fourth unelected Prime Minister.”

“Some suspect Renzi could consider calling for a snap parliamentary election.  The problem is that without the referendum being approved, the Italian political system is in disarray.  Reforms approved earlier this year change the way the lower house is elected.  Extra seats are given to the party/coalition that receives the most votes.  Ostensibly this is to facilitate stronger governments. The Senate was excluded from the new rules and was to be reformed (reduced in size and scope) by the referendum.”