populist and nationalist rise almost everywhere in Europe"……"The risk of ungovernability is quite strong... if the populist parties ever manage to have a blocking minority in the European Parliament,"
Stephane Sejourne
As French Farmers shut the auto-routes and effectively blockade Paris, blaming both the French Government and the EU for “absurd, extreme, and unworkable environmental policies dreamt up by the EU and zealously implemented by the Macron government" the technocrats in Paris and Brussels are getting distinctly nervous. The quote from Stephane Sejourne (a key ally of President Macron) identifies the real concern, which is not just that the ‘peasants are rebelling against the Bien pensants’ but that, following the upcoming EU Elections in June, the whole magical thinking that underpins the power of the EU might disappear and it will lose its ability to ‘govern’ the 448m people in 27 member countries.
According to an article in the Times, quoting the European Council on Foreign Relations, following the upcoming Elections in June “anti-EU populists will be either the largest party or dominant in 18 of 27 of the bloc’s members.”
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The French protests have more in common with the earlier Dutch Farmers’ protest than with that of the recent German Farmers, being an explicit rejection of the Green policies that have replaced the Common Agricultural Policy and the Common Industrial Policy as the EU’s ‘Raison D’Etre’. The Germans were more like the earlier French Gillet Jaunes protests, a rejection of austerity policies (taxing diesel while describing it as a ‘removal of subsidies’ disingenuously wrapped in the inevitable climate change banner). But the political effect is essentially the same; the labourers are at the gates of the Citidel and they are not going quietly.
Importantly, while the narrative spin is always about the rise of the ‘Far right’, what we are actually seeing is a push back against Davos man and Globalism, the technocratic supra-nationalist putative global government based on the UN, WHO, WEF and multiple associated Global regulators that has co-opted ESG and Climate change as their means of control. Meanwhile, Multi National Corporations and Financiers have accordingly switched their lobbying and rent seeking to these bodies, bypassing national governments. Indeed, we see from the same article (apologies, paywalled) that “Popular hostility to “net-zero” climate change measures and anger over uncontrolled migration are the main drivers of the voter revolt against the EU consensus and are expected to drive a realignment of European politics”.
This has potential widespread implications for investors. First, that, contrary to their own epic levels of self regard, this is not about the EU bureaucrats and their upcoming EU elections, rather, this is about populist pressure on elected politicians at the country level. History tells us that in order to cling on to power, incumbents will likely bow to rising anti Globalist sentiment and start to row back on the Green Agenda and to push back against some Global corporations.
Accordingly there will be some earnings downgrades coming in its wake, and not just in Europe. For example many of the Global ‘Moat’ companies owe their high margins to a cosy political relationship with regulators and one only has to see what happens to Chinese companies when the rules change. (At this point we should add that this post is for information purposes only and should not be considered investment advice. Please do your own research and always consult your financial advisor)
Second, more assertive national governments are going to push back against the EU in general and in particular its slavish following of the International (read US) agenda on everything from Climate to Health and Foreign Policy - as well as of course interest rates, which appear to simply ‘follow the Fed’. All policies, including a lot of regulation, now appear to come from supra-national bodies and the idea that not only does one size not fit all, but that many of the policies being imposed appear to be distinctly against the interests of the countries concerned is being more widely aired. This could lead to a weaker (and more competitive) Euro as well as more independent monetary and even fiscal policy.
Third, Europe is likely to push back more generally against the US, whose dominance has increased dramatically under Biden - even if, ironically, they will use Anti-Trump rhetoric to do so. This could for example lead to renewed ‘back channel’ discussions with Russia on Ukraine to try and achieve better energy security and a wider rejection of the ‘my way or the highway’ approach the US has to Foreign Policy.
The origin of the EU was the European Coal and Steel Community, set up in 1951 - encompassing Belgium, France, Italy, Luxembourg, The Netherlands and West Germany - and the point has not been lost on the people of those countries that the source of their economic strength - cheap energy and industrialisation - has been steadily eroded, by what many are seeing as a deliberate policy that has benefitted the US, but also China and India, at Europe’s expense. Populists politicians see the Globalists going from COP, to Davos, to the G7, the G20 and the rest and setting out Grand Green Agendas that seemingly only the people of Europe appear to be paying for. And they are starting to shout about it.
Economic Suicide by COP
This also includes the UK, who, if anything, are even more under Globalist/US influence. UK Prime Minister Rishi Sunak’s initial attempts to push back against Global Green were rapidly rebutted by the powerful lobbyists, but with a General Election this year, anti Globalist and anti US rhetoric is going to feature here too. This last week, for example, the UK announced the closure of the steel mills at Port Talbot in Wales, largely because, thanks to the Green Leap Forward, embraced with manic enthusiasm by the British ruling classes, the cost of energy makes them uneconomic compared with, say, China, or indeed India where, thanks to Global Markets, their owners now come from. They could of course use the coal right by where they are situated, but that, we are told by the Globalists at the UN, is very bad indeed for the planet, even though the Chinese will use their coal to make the steel which then goes on their ships and comes 10,000 miles back to the UK. You haven’t changed the demand for steel, or the Co2 produced in making it, you have simply moved the economic benefits from the UK (in this instance) to China, India or the US.
It’s not just steel of course, the chart from Statista shows the (lack of) competitive advantage the UK and Europe had in industrial Electricity Pricing in 2021.
source Statista 2024
India comes in at 9 pence and China at 7 pence, literally half the price of the UK, while German Industrial Electricity was a similar price to the US before the government doubled it with excise duty. Nothing more up to date is available post Ukraine, so the actual amounts will be higher, but it’s the relative that matters more than the absolute.
The three largest producers of man made Co2, China, the US and India between them produce more that 51% of the total and have electricity prices between 2/3rds and a half that of the UK and Germany.
Similarly, the DRAX power station on Britain’s east coast sold its coal fired turbines to Germany and now burns wood pellets imported from the East Coast of the US. No less coal is burned in Europe, just a lot more bunker fuel to ship ‘biomass’ thousands of miles. And now DRAX wants GBP40bn to capture the Carbon.
Someone has to pay for this shift from cheap and reliable energy to its new expensive and unreliable green equivalent and as ever, it’s the household. Or as they are now being called, the voters. Products are more expensive, or replaced by cheap imports from countries with lower energy costs and thus leading to job losses, while much of the higher production costs goes into household electricity prices that are now in 2024 US$0.44 per Kwh in the UK (second only to Ireland as the highest), followed by Italy at $0.43, Germany at $0.4, France (thanks to nuclear) at $0.26 but of course the US is still down at $0.17. So here again, Europe pays between two and three times as much for its Electricity at the household level.
Then we have electric cars. We are big fans of electric cars from a zero roadside emissions viewpoint, but they are currently expensive for consumers. Moreover, rules to force Europeans to only drive electric cars are coming at the same time as policies to make their ‘fuel’ ruinously expensive - and that’s before the likely hike in duties once smart meters are put in. Having seemingly ‘got on board’ in the wake of Dieselgate, the big European auto manufacturers are pushing back however, and we notice the old ‘range anxiety’ canard appearing again. One major issue is that the Chinese have developed a huge electric car industry already and are threatening to eat Stuttgart’s lunch. This will likely mean tariffs on ‘cheap’ imports, but here again the consumer loses out. They still have to buy an expensive new car. Unless they vote for someone who says they won’t have to. Same with heat pumps instead of Gas boilers.
And so it goes on; German Greens have closed the last of their nuclear power plants at the same time as US led sanctions have cut off the cheap Russian gas on which the industrial base of Germany is now based - not to mention the agricultural sector’s need for fertilisers. Never mind, according to the politicians, they can now import lots of gas from places like Qatar or even the US, where fracking (not allowed in Europe, naturally) has unlocked enormous amounts of cheap energy. Although of course it won’t be sold for low prices, Europe has been paying up to six times as much as it used to for its energy, and now Joe Biden is announcing that they might not even be allowed to do that, apparently bowing to Green activists but also almost certainly to pressure from US corporates not wanting Europeans desperate for LNG to force up domestic prices for Natural Gas. And now this week, thanks to the (US led) bombing of the Houthis in Yemen, the inevitable retaliation has led to insurance companies refusing to insure the Suez Canal traffic, disrupting supply chains and threatening inflation again and Qatar has temporarily suspended shipments of LNG to Europe.
So we see that those original countries of the European Iron and Steel Community are all in the danger zone of becoming ‘ungovernable’ in the words of the Brussels bureaucrats, primarily because, having seen the origins of their wealth - coal and steel - effectively banned by the UN and, having adapted to use cheap gas from Russia, they now find that denied them too, along with other key raw materials. Their industrial power is now expensive and uncompetitive and their households spend 6 to 10 times as much on fuel as their US equivalents, while their industry is getting crushed by Chinese, Indian and US competitors whose costs are much lower.
It would take a conspiracy theorist to blame either the US or China for deliberately setting policies that suit their own countries at the expense of the EU, but that is almost certainly going to be some of the rhetoric we will start to hear from the populists. Trump has made it clear he will push back against the Democrats’ Green agenda on Oil and Gas and will likely spin it as being stopping something that benefits China - who make the electric cars, almost all the solar panels, the key rare earths that go in all the Windfarms, all while using plenty of Coal, gas and Nuclear power. Marine Le Pen, meanwhile, has previously said she would oppose energy sanctions on Russia for example as well as weapons for Ukraine, both seen as US policies. Other protests such as AfD in Germany are more in line with those identified by the survey discussed above - anti open borders and anti Green and thus may pick up on any of Trump’s anti China rhetoric if it suits. The Grand Project of the Brussels Bureaucrats is facing attacks from all sides. Death by a thousand cuts even. Ultimately, the Euro itself could come under a lot of pressure.
Thus, rather like the Butterfly’s wings over Mount Fuji, we may find that Tractors on the outskirts of Paris could lead to a dramatic unravelling of the stealth Global Government assembled over the last 20 years. Maybe this is the actual Great Reset and building back better. Just not the one Klaus had in mind?
