European polling is turning bullish

Don’t look now but European election polling is turning bullish for growth. First up, the Netherlands poll in six days is seeing a crash in support for Geert Wilders’ racism party (in grey):


Mr Wilders could never win anyway given he could not form a coalition but with his vote down to 20% from a high of 34%, he might deliver a surprise drubbing of himself to markets.

Next, the French election is holding Le Pen at bay. In the first round of voting she is losing her big lead:


In the second round she is still miles to the rear:


Never say never but I can’t see her getting up from here barring something like a terrorist attack. Algrbris reckons it’s no problemo:

Even if Ms Le Pen wins, redenomination risk is low. In the FN’s Les 144 engagements présidentiels, Le Pen details her ambitions to target 2% GDP growth by 2018 partly through tax cuts to SMEs and individuals in lower-income brackets. More importantly, she also plans to renegotiate EU membership and to break the single-market with a tax on imports.

We see a very low probability (14%) of Le Pen progressing on her Euro-exit agenda, even in the unlikely event of her winning both rounds of elections. For Le Pen to deliver on Frexit, she will need approval from France’s bi-cameral parliament. France’s parliament is split between the Assemblée Nationale and the Sénat. In theory, both houses need to pass legislation for it to become law, but in practice the final decision rests with the Assemblée Nationale. However, Le Pen’s FN party currently only has 2 of the 577 deputies in the Assemblée Nationale. The next elections for the Assemblée Nationale will take place on the 11th and 18th this June, but the latest poll suggests that FN is only likely to get 58-64 seats, still far short of a majority. Additionally, FN has no deputies in the Sénat. Only a third of Sénat deputies are up for re-election every three years. This means the earliest the FN could control the Sénat is after three years, in 2020.

Markets currently overestimate the risk of currency redenomination. If we assume that French debt in local currency would be worth around 20 cents below its German equivalent, then market prices imply a 5% probability of redenomination: the 1% yield differential in 2-year French vs German bonds is roughly equal to 5% probability times a 20% loss given Frexit. Instead, we estimate a 1% probability of redenomination on French sovereign debt (8% probability of Le Pen winning elections, times a 14% probability of a referendum winning).

So, France would swing a little Right with Macron. He’s your classic eurocentric progressive fiscal conservative. Everything everyone loves to hate right now. Go figure.

Finally, Germany may be building to a shock but not a bad one, via the FT:

Steffen, a salesman, volunteer firefighter and village councillor, has long been one of Angela Merkel’s most enthusiastic supporters. But the card-carrying member of the German chancellor’s Christian Democrat party says he will vote for her with a heavy heart in September’s general election. “She is not so adored any more,” says the 42-year-old at a party rally last week in the Mecklenburg Vorpommern town of Demmin, close to Ms Merkel’s constituency. “There are many problems: problems the chancellor helped create. She wants to maintain the rule of law but she did not keep it herself in controlling borders [during Europe’s 2015 refugee crisis].” Seeking an unprecedented fourth term in office, Ms Merkel is facing her most difficult poll battle yet — and she is part of the problem. After 12 years, burdened by some of the contentious decisions of a tumultuous period in power, one of her biggest jobs is to show she still has fire in her belly — and give her supporters the same feeling. Martin Schulz, her biggest rival, has done just that. The energetic former European Parliament president has galvanised the Social Democrats and turned himself into a credible rival since he took the helm of the party from the unpopular Sigmar Gabriel in January.

Polls bear it out, black is Merkel, red is Shultz


Shutlz would bring eurobonds and good times back to Europe. Indeed, if Macron won France would be further Right than Germany.

Capital is still pricing for risk, also via the FT:

Japanese investors sold French government bonds for the third consecutive month at the start of the year, reflecting souring sentiment towards the country’s debt ahead of its presidential election next month. The latest figures from the Ministry of Finance show Japanese money market managers sold ¥34.9bn ($0.3bn) of French debt in January. That is a significant slowdown from the ¥232bn dumped at the start of the year, but marks the first three-month selling streak since 2011.


As you would.

The longer term risk till remains Italy where Five Star (yellow) continues to make headway:


In sum, there’s enough risk still here to make capital cautious. But there is also a clear shift towards eurocentrism in the core countries.

The three most important implications for asset allocation is the US dollar, gold and European stocks. The euro will get a good lift as these polls are born out and gold will sink (despite less upwards pressure on the USD). If Europe gets it together it might be time to think about switching out of gold and into something like inflation-linked bonds for portfolio protection, as well as adding a European stock long.

Houses and Holes
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  1. “If Europe gets it together….” – hell will freeze over before that happens – the current levels of debt will never be repaid – a massive credit default is only a matter of time.

  2. I’d say the Trump win has caused the Europeans to stock, and just maybe say hey maybe we don’t want an outside radical after all…

    • This, exactly this.

      The Netherlands has seen trending hashtags such as “#hoedan” (and how exactly?) in response to Wilders complete lack of willingness to debate or even state the actual activities he will implement to achieve his promises. The people in Europe have seen a populist rise to power and fail completely. The hollow shell has been exposed. Even Russian media lost their admiration for Trump!

      I still think centre-left coalition for The NL.

    • That’s because Trump and the Republican have shown themselves to be utterly incompetent and corrupt. Had they been the opposite, the story for the racist parties might have been different.

  3. It’ll be interesting to see how the Dutch and French elections play out. I think that Le Pen and Wilders will ultimately do a lot better than the polling shows, as Trump did in the US and for the same reasons, although I don’t think that Le Pen will end up as the French Prez because there is just too much of the status quo stacked against her. Wilders also has a hard row to hoe, but no what happens he’s going to be more influential after the election than he is now.

    Macron was reported a couple of weeks ago as saying “We have entered a world of great migrations and we will have more and more of it. In the coming decades we will have migrations from geopolitical conflicts that will continue to play, and we will have climate change migrations because the planet is in a state of deep imbalance. France will not be able to stem it, and Europe will be affected immediately”. Now, that could be interpreted as simply acknowledging a hard reality, or it could be interpreted as a pissweak submission to a foreign invasion before it’s even happened. Whatever the case, I don’t think talk like that will go over too well with those involved in the current Jacquerie.

    And as for Merkel, she’s the third German leader in a hundred years to lead Europe towards catastrophe. Any German who votes for her, with a heavy heart or otherwise is an idiot. I hope that she gets the boot, and then Germany should be broken up into a tiny bunch of little independent states like they were before Bismark did his thing, and never be allowed to have any influence on Europe or the rest of the world ever again, apart from exporting beer and lederhosen and oompa bands..

    • Except Merkel’s rival is even more pro-immigration and even more pro-EU. No, what’s happening in Germany is confusing at this stage, and probably has more to do with local German political issues (like the longevity of Merkel’s government) then any broader malaise washing through the Anglosphere.

  4. arescarti42MEMBER

    If there’s one lesson to be learned from Brexit and Trump, it’s not to trust opinion polling.

    Don’t forget, Brexit seemed almost certain not to happen until the first results started coming in, and in the lead up to election day, Hilary was basically a sure thing.

    • Welll….yes and no. There was polling showing Trump winning, enough to give him a 20% probability on many aggregates. It was the way the polling was interpreted by the media and political class that created the Hillary winning mantra.

      The same with Brexit, although it was even more in doubt. Leave polled close to winning throughout the campaign, and quite a few polls showed it winning. Once again, it was the interpretation that failed. The media and political class is primarily in London, there is barely any connection to places outside the capital like the North or Wakes outside Cardiff. If you only read the broadsheets and watched the BBC and Channel 4, you would have been certain that Remain was an obvious choice. The misinterpretation has continued post-vote. The way Corbyn’s leadership was initially shored up by new young pro-Remain members highlighted the confusion with what the vote actually means for the British political class, and on what side each party was actually on.

    • Correct! Modern opinion polling is clearly broken, and I give it the same credence I give any MSM news…ie little to none. In my view, the only appropriate attitude towards these polls and much other “news” is deep suspicion and skepticism.

      And for an indicator of what might be to come, I recommend every MB reader have a look at this link:

      That is an incredibly vicious and insulting personal attack on a current German leader by a potential French leader in a parliamentary setting. Unbelievable stuff…I almost couldn’t watch it. As the link says, it’s like the saber rattling before a declaration of war. And Le pen obviously thinks it’s going to boost her chances rather than hurt them.

      These are interesting times.

      • “Declaration of war”

        She’s saying that if she were elected, she won’t co-operate, at all, with Germany, and they don’t envisage any reproachment because she views Germany is a vassel of the US.

        In other words, “You are someone who works against our best interests, and you won’t change”.



      • “That is an incredibly vicious and insulting personal attack on a current German leader by a potential French leader in a parliamentary setting. Unbelievable stuff…I almost couldn’t watch it.”

        Oh dear how precious !
        It was excellent stuff & fully deserved by the fat plum pudding who has fucked Germany.
        Plus spot on comment re Germany being fully beholden to the USA – -The Occupationists

  5. Guys, EU is here to stay with or without the UK. I think even that UK will try to come back within next 1-2 years.The low pound is going lower if they don’t, and that hurts.

    • Yes HnH stuffed that one in there. That word has been used by those of European descent to end and ridicule anyone who ever disagrees with the non mandated invasion of multiculturalism. It’s a conversation killer. If NL and FRA don’t push back hard now I foresee the rapid unraveling of those nation states as mass 3rd world immigration forever changes them (for the worse).

      • I’ve seen videos like this before in Africa, the Middle East and parts of Latin America…no one seemed to question or accuse the messengers…or the message.

      • Great fearmongering video using a quote from one of the most right-wing, populist politicians in Europe.

        Reality however is that, in The NL at least, the muslim population has been stable forr years according to the Dutch statistics agency:

        Plus, rather than Islamising the country, the opposite is happening and Muslim migrants are quickly adopting a more Dutch approach to their religion. At least according to this professor:

        Can’t be bothered to translate. Already spent too much time dealing with unfounded statements and cherry picking.

        And yes, Geert Wilders was found guilty by a judge of inciting hatred against the group of Morrocan people.

      • fitzroyMEMBER

        That says more about freedom of speech in the Netherlands than it does about Wilders.

        “Feelings of fear or distrust coincide with a high degree of social segregation. About two-thirds of Turks and Moroccans “associate predominantly with members of their own ethnic group,” while a similar proportion of native Dutch “have little or no contact at all with immigrants.” Moreover, contacts between the groups are decreasing, notably those between second generation Turks and Moroccans and Dutch.[26]”

      • AnonNL I’m not cherry picking intentionally. I’m making a point that the accusation of racism is only used on and by those of European decent.

        Here is the real framework shifter…so what if he incited hatred against a group of people that are not his own in his own land.

        The insanity of Europeans is mind boggling…you’re like those people on the rooftop of LA in Independence Day welcoming the aliens.

        Well good thing you’re here and we can have discourse and disagree…if we were in Morocco I’m sure we could not.

  6. Future EU will be fortress Europa, only for Europeans plus a few refugees. Something like in OZ minus 407 and it’s going to be awesome.