Political and economic integration may fall apart as a result of question over EU sustainability

The EU as a super-state monetary union is old fashioned and redundant in the current global economy, urged Neil MacKinnon, Chief Macro Strategist for VTB Capital, when he joined Zak Mir and Alan Green on the Tip TV Finance Show.

Reaction to equities and France from the Paris terror attacks

MacKinnon outlined that as terrible as the events were in Paris last Friday, the impact on equity markets is likely to be short-lived. He noted that the immediate reaction saw investors head to safe haven assets, with equities suffering, but they have bounced back fairly quickly with US equities up this morning. As far as the French economy is concerned, MacKinnon highlighted that it was struggling anyway and falling behind the likes of Germany, based on the country maintaining the fiscal straight jacket and being stuck with unemployment and deflation. He added that 8% of the French economy is based on tourism, plus the fact that business and consumer confidence will be damaged will all certainly have a negative effect on France. To finish, MacKinnon expressed that countries which have an above average level of terrorist attacks are likely to get less foreign direct investment.

Changes afoot for the EU

MacKinnon highlighted that France is preparing to abandon the stability and growth pact as a result of importance, with President Hollande instead following the Eurozone security pact to a greater extent. He continued that other EU countries are trying to escape, with Italy attempting to move past the policy enforced on fiscal policy, whilst the UK has its in-out referendum in 2017. This led MacKinnon to note that the whole process of political and economic integration may slow down or fall apart. He emphasised this point by reflecting the success of anti-EU and anti-austerity parties across Europe, and urged that changes may be seen in monetary policy and the approach to the European Union. MacKinnon concluded that the EU is dying of sorts, with low growth and employment, as well as deflation and a failing one currency fits all policy, meaning there is a question mark surrounding the sustainability of the EU on both the political and economic fronts.