Capital Gold Group Asks: Is the EU Doomed?

LOS ANGELES, Dec. 6, 2016 /PRNewswire/ -- Instability continues to drown the euro, after votes were counted in Italy and Austria over the weekend regarding the future of the two nations' governance. The two European Union member-states moved in opposite political directions, mounting pressure on Germany to keep the crumbling Eurozone upright.

In Italy, citizens voted in favor of a populist, nationalist agenda, turning down proposals from the government that would promote constitutional changes, make it easier for parliament to pass laws, and ideally make the nation more competitive. These measures were voted down, and the defeat prompted Italian Prime Minister Renzi to resign from his post.

According to the Wall Street Journal, the nation's vote, "reinforced a widening split between the economics needed to sustain Europe's common currency and the continent's rising tide of populism."

Meanwhile, Austria's liberal internationalist party took home a win over this weekend, as leader Alexander Van der Bellen was elected president, beating out his anti-immigrant and far-right rival.

This surprising election outcome makes Austria a European outlier. Over the past several years, mainstream parties in Europe have been losing ground to populist movements, many of them on the far right. In fact, the Wall Street Journal calls 2016, "…a year in which nationalism and populism has swept across Europe." Austria's move to the center-left only goes to show that while populism is growing in popularity, the European Union is still ideologically divided – primarily on issues of immigration and national borders.

The resignation of Renzi makes it very likely that Italy, the EU's fourth-largest economy, will join the three Eurozone founding members already holding elections in 2017. Pundits are now speculating if Renzi's resignation could clear the way for the formation of a "caretaker government."

Presently, the biggest winner out of Italy's referendum vote is antiestablishment party, the Five Star Movement, who has been snowballing in popularity. Led by comedian-turned-politician, Beppe Grillo, Five Star Movement has called for such radical changes as a non-binding referendum on Italy's euro membership, an end to EU-mandated government-spending limits, income guarantees for all citizens, and possibly printing a parallel Italian currency.

"With the rise of the antiestablishment movements sweeping across the globe, you can make a solid case for people to be wary of fiat currencies and move into gold as a haven," says Jonathan Rose, CEO of Capital Gold Group. 

Public-opinion surveys indicate that roughly 30% of Italians would back Five Star Movement candidates if parliamentary elections were held now, putting Five Star neck-and-neck with Mr. Renzi's Democratic Party. This strong show of public support means that Five Star could end up in power at some point, and this is significant because all eyes are on Italy as the next-potential Eurozone financial crisis.

Since Italy joined the EU in 1999, their GDP has stagnated and their government debt has swollen to 133% of annual economic output, putting Italy in the second-highest debt in Europe after Greece.

Daniel Fisher, CEO of Physical Gold Group says, "The Brexit vote was a strong chess move on the board for people to follow suit, and I would only imagine in the long-term gold will be the ultimate safe haven."

As the U.K. extricates itself from the Eurozone bloc, economists question whether Italy will be able to survive in the long-term using the same currency as a powerhouse like Germany. 

"The antiestablishment feeling is stronger than the desire to reform," said Stefano Stefanini, an adviser at lobbying and public-affairs firm Podesta Group and an aide to former Italian President Giorgio Napolitano. "There is a reluctance to change, an innate conservatism in Italy." That is the paradox at the heat of European – and American – politics today: a resistance to change among voters is leading to antiestablishment choices at the ballot box.

The growing popularity of antiestablishment order, alongside mounting instability in Europe and the crumbling of the Eurozone, are all rallying toward the inevitable devaluation of the euro. And thanks to the sweeping inescapable phenomenon of globalism, that devaluation is going to find its way to the stoop of the American dollar. Currency devaluation, much like instability, has always been good for gold – as gold enjoys an inverse relationship with fiat currency.  

"As elections sweep across Europe next year all eyes will be on the outcome and to see if these antiestablishment movements continue to press forward," says Mr. Rose. "And if so, the precedence is being set that people want change. Whether that's good or bad, only time will tell. But that's why gold will be the real winner as the hedge against uncertainty." 

Logo - http://photos.prnewswire.com/prnh/20160707/386986LOGO

SOURCE Capital Gold Group