As Europe’s daily soap opera unfolds with twists and turns a’plenty, the one thing we are consistently hearing is that it is time to get used to the new normal.
Central bank intervention, on-the-hoof Government regulation, austerity, unemployment, deleveraging and systemic risk are here to stay but the backdrop is a fascinating combination of forces feeding vicariously off one another.
Bank illiquidity, sovereign debt and suppressed growth have been talked about ad infinitum but they are all encircled by a rather nasty political sclerosis. This means the problem is far from budging but it does keep the drama more entertaining than EastEnders.
Last episode, head of the IMF Christine Lagarde was forced to backtrack for labelling Greeks a nation of tax dodgers, something to do, no doubt, with the dodgy ratio of Porches to taxpayers declaring €50,000-plus incomes in Greece.
In retaliation, a Facebook page, ’Greeks are against Lagarde’, emerged. Greece is also having a bit of a spat with Germany, its popular press portraying Angela Merkel in a Nazi uniform.
And then the cliffhanger. The BBC was flooded with calls, led by Phillip Schofield, no less, for a British in/out referendum on the Eurovision song contest, after the rest of Europe failed to show its appreciation for ’The Hump’. Drama indeed.
The European project was to dismantle militant nationalism, as Antony Beevor, chronicler of European history, points out, but as Europeans see how little power their politicians have, further disintegration seems on the cards. And this manoeuvre will cause some horrendous crunching noises in the process as the Faustian pact of EMU did not build in a reverse gear. The UK is regarded as less of a basket case but being outside the euro does not change the fact that we are highly correlated.
So what does the new normal look like? Advisers are in agreement that risk-free returns have become return-free risks and opportunities to find reliable new income opportunities are scarce. There is, however, consensus that it is still very much a story of emerging markets. In 2014, 50 per cent growth is expected to come from Asian emerging markets but there remains the downside of corruption, liquidity problems, human rights and lack of transparency. As such, it is a great growth story that must be handled with care. Not a job for Engelbert.
Phil Wickenden is founder of So Here’s The Plan
All quotes taken from interviews with QCF-level 4 qualified advisers from fee-charging businesses.