"Forget Germany, Spain Is The Real Problem"

Following yesterday's German election, which despite Merkel's 4th victory was a rout for the establishment "grand coalition" parties of CDU/CSU and SPD which saw its worst election performance since the 1940s offset by a surge in the ascendant right-wing AfD, there have been numerous analyst reactions to the "sudden reemergence" of populism in Europe, but one we find perhaps the most insightful and useful, comes from Bloomberg macro commentator Mark Cudmore, who writes this morning that for all the concerns, it's not so much Germany as what is about to happen in European peer Spain, where Catalonia is set to hold an independence referendum on October 1, that should be on traders' radars.

Below is his latest Macro View explaining why...

Euro Crisis Trading May Be Due for an Encore

 

The euro is once again set to suffer from an outsized political premium. Spain, rather than Germany, is the real problem. 

 

The AfD’s strong performance in the German election and the lack of a clear coalition are both concerns at the margin, but they wouldn’t provide a sustainable headwind for the euro in isolation.

Much more worrying is Catalonia’s planned independence referendum on Oct. 1. Investors have been ignoring this story, but this week will see it take center stage.

 

The heavy-handed response by the central government in Spain has significantly elevated the probability of civil unrest as well as potentially increasing support for independence for the region.

 

People opposed to breaking away probably won’t vote, so any poll that proceeds will return an unrepresentative and overwhelming result for independence. If Mariano Rajoy is able to snuff out the illegal referendum, it’ll only intensify the demands for another, more official independence vote. Failing to stop it means there’ll be a symbolic declaration of independence.

 

Either way, it’s probably going to lead to an increasing clamor for Catalan separation. The seriousness of the situation seems to have been overlooked by many investors, but it won’t be for much longer. The negatives are myriad.

 

Divisions within Europe are mounting again. Any success by Catalonia sets a dangerous precedent for other want-away regions, not just in Spain.

 

It emphasizes that many of the structural imbalances in the euro zone haven’t been fixed. Inequality is still growing.

 

On the back of AfD’s performance in Germany, it’s a reminder that large swathes of the population remain unhappy with the region’s policies. And once again, it’ll be an excuse for euro-bearish financial commentators to hype up the risk from Italian elections next year.

 

The beginning of the euro’s impressive rally coincided with Emmanuel Macron winning the French presidential election and thereby quashing political fears in the region. A correction in the euro is now likely to coincide with Spain and Germany bringing those risks back into the light.

Comments

cahadjis Mon, 09/25/2017 - 06:13 Permalink

The spanish government has messed it up. This is textbook stuff - the Barbara Streisand effect, the more the government violently fights it, the more the Catalans predictably fight back, even the moderates. Even the region where i am (Costa del Sol) is watching with interest ....

Mr 9x19 secretargentman Mon, 09/25/2017 - 07:55 Permalink

no, the real problem is those writting articles to struggle for life by telling bullshit such mixing a done election in germany opposed to a simple taxes issue of club med south lazy gays.it is not a problam at all, even if they succed in their operation, 1st move is EU adhesion, 2nd move is eurozone adhesion.even real madrid soccer club  will  gain notoriety, no more sharing victory quotas with barcelona on UEFA champions league.it is win-win-win  

In reply to by secretargentman

Government nee… Kotzbomber747 Mon, 09/25/2017 - 08:29 Permalink

German election a dud?  Dont see how one can avoid the admission that the German election shows the waning strength of the globalist borg.Spain is another symptom of the globalist borg's disease.There is a real probability (I would still suggest this is 0.2) that Spain devolves into widespread organized violence. It all depends on how effective the Catalan leadership is, and how quickly an international actor steps up to train and arm those willing to fight for something (might be independence, might be money, might be something else). 

In reply to by Kotzbomber747

Kotzbomber747 Sirius Wonderblast Mon, 09/25/2017 - 11:50 Permalink

Yes, Germany is a dud, because what will change after yesterday? Jack shit!The AfD is still (since the party congress in Cologne in April) in huge internal turmoil as Frauke Petry slammed her political colleagues yesterday when she basically walked out of a press conference, but of course you won't read about that here because none of the Tylers speak German and none of them read German newspapers or websites.Basically the AfD will continue to be painted as "right-wing extremists" by the other political parties and the mainstream media and as a result they will continue to be quarantined (the same what has happened in The Netherlands to the PVV and FvD, and in Belgium to the Vlaams Blok), while Angela Merkel will form some sort of coalition in order to continue to push through the George Soros agenda of; more 'refugees,' more TTIP, more EU, more bailouts, more "Europe," and more confrontations with Russia.

In reply to by Sirius Wonderblast

BarkingCat Government nee… Mon, 09/25/2017 - 08:43 Permalink

Yes, it is a dud.Nothing has really changed. The Hitler faced bitch is still leading Germany into extinction.  Compare that to the Spanish election back in early 2000s when people there were unhappy about their government's involvement in Iraq (helping Bush). The election resulted in new government and Spain pulling out of any of Bush's foreign advantures.Also compare it to last election in Poland. That government agreed to take a few thousand of Merkel's "guests" and was very aligned with the policies coming out of the EU, so people there voted in a new government that promised to keep out those "guests". So yeah, the German elections were a very disappointing dud.

In reply to by Government nee…

stilletto2 BarkingCat Mon, 09/25/2017 - 09:29 Permalink

But they are a start. Given the huge confirmation bias, media bias and obedience bias in germany any dissent to the status quo is a major challenge. I think the surge in AFD has cracked the ice of consensual obedience in germany.  Now, with luck that crack will progress to a shattering of the status quo. So watch and wait, its could be the critical crack that progresses to reform like UKIP cracked the consensus in UK and caused Brexit.

In reply to by BarkingCat

Government nee… stilletto2 Mon, 09/25/2017 - 10:06 Permalink

This.  WW2 didnt start overnight, and it was a combination of disparate factors, including the severity of the Versailles Treaty, economic malaise, and the rise of new fascist entities, who themselves lined up against a rising Communist tide.  Rhyming forward to today, there are increasing burdens of the EU on some of the nations (southern debtors, sandnigger migration), economic malaise, and the rise of new polarized political entitites.  We havent seen REAL brownshirts yet (Antifa in the US comes the closest), but I would argue that 70 years ago, the street thugs took 5 years past the national-level recognition of their party to develop.  

In reply to by stilletto2

Don Diego Overflow Mon, 09/25/2017 - 09:45 Permalink

what I suspect is that any broke off region would be allowed to stay de facto in the EU if not de jure. The EU has probably given assurances to the Cataclowns through back channels in that sense. But here I am speculating, unlike most people on these thread I can tell the difference between facts and speculation.

In reply to by Overflow

Overflow Don Diego Mon, 09/25/2017 - 13:57 Permalink

And then convert 80% of Spanish population in fierce anti-EU?  Not to mentin pelople in other secession tensioned countries... Risky strategy in such a difficult moment for the Union.  Who knows...  but I prefer to make may speculations attending to the known facts only. And, anyway, were talking about the impossible. In a few weeks, when all this farce ends, you and me will have a lot of fun delivering owneds to all these SJW's in ZH! 

In reply to by Don Diego

Don Diego Overflow Mon, 09/25/2017 - 17:41 Permalink

in case of independence the EU will probably give eeeeextended deadlines for Catalonia to leave the EU, in a way it will never effectvely leave. A bit like Brexit, really, both the EU and the British are conspiring to betray the electorate's mandate to leave the EU, it will take forever unless something unforeseen happens. It won't be easy to escape from the EU plantation.

In reply to by Overflow

Overflow secretargentman Mon, 09/25/2017 - 08:36 Permalink

Correct. And "the governed people" are the 42M spaniards, including the 7M catalonians,  2M of them are seccesionists. What rights do you thing the gov sould protect? Huge majority of spaniards are very happy the gov has finally decided to face this toxic game ruining our coexistnce.  All SJW and progressive propaganda telling that the Rajoy's crackdown will push millions towards rebellion.  LOL.    Rajoy is going to win on a lanslide thanks to these clowns.    

In reply to by secretargentman

BigJim Overflow Mon, 09/25/2017 - 08:47 Permalink

 What rights do you thing the gov sould protect?Why, the rights of the 40M Spaniards to continue to force the 2M Catalan secessionists to do their will and keep stumping up for their bennies, obviously.Will crushing the 2M cheer up the other 40M who wish to parasitise them? Of course! Fascism is always popular; that's why the US was founded as a constitutional republic, not a democracy, so that the unproductive majority would be unable to feed of the productive minority. And to protect the "rights" of White males who just hapopened to own vast swathes of recently... er... "acquired"... land.All good things come to an end, of course, and the US, thanks to increasing "democracy" now has full-blown participative fascism. Yay for democracy!

In reply to by Overflow

Sirius Wonderblast Overflow Mon, 09/25/2017 - 08:46 Permalink

 "Rajoy is going to win on a lanslide thanks to these clowns."Not if repressive tactics result in increased Catalan separatism leading to a split or a major unrest. Already the Catalan Police are rebelling against Madrid's orders. It would adversely affect Spain and the rest of it's population if the centre loses it's Catalan cash cow or engage in force to prevent secession, and lead to wider unrest. It's getting past whether or not the referendum itself is legal, and more to whether or not sufficient Catalans wish to still be governed from Madrid. Madrid is in danger of losing its' mandate by it's actions, even if the technical arguments should support its' rule.

In reply to by Overflow

Don Diego Cosmic Energy Mon, 09/25/2017 - 07:33 Permalink

are the Catalan going to let vote the 4 provinces? If they do, the provinces of Barcelona and Tarragona would choose to stay in Spain. And are the provinces going to let the counties vote? at what territorial entity level does "freedom" count? at federal level? at regional level? at province level? at county level? at town level? at neighborhood level? and so on.If you agree with the Catalan vote then you must agree that lower Catalan territorial entities should be able to decide whether they want to become part of Catalonia or not.

In reply to by Cosmic Energy

Captain Chlamydia Don Diego Mon, 09/25/2017 - 07:43 Permalink

at what territorial entity level does "freedom" count?It is curious that people tend to regard government as a quasi-divine, selfless, Santa Claus organization. Government was constructed neither for ability nor for the exercise of loving care; government was built for the use of force and for necessarily demagogic appeals for votes. If individuals do not know their own interests in many cases, they are free to turn to private experts for guidance. It is absurd to say that they will be served better by a coercive, demagogic apparatus.MN Rothbard

In reply to by Don Diego

Overflow ZorroHedge Mon, 09/25/2017 - 13:21 Permalink

Much more corrupt. It seemed difficult, but they managed to. Catalonia sums more corruption cases than Madrid and Andalucia together, and they alone get about 35% of cases being 15% of population. That's why those clowns are playing independence and sendig their poor sheep to streets, it's a last minute attempt to avoid prosecution. Subpoena is coming, Puchi!!

In reply to by ZorroHedge

BobEore Don Diego Mon, 09/25/2017 - 08:38 Permalink

As per your previous query - what would you have them do?... and in respect to a further clarification of the grounds of discussion as provided presently...at what territorial entity level does "freedom" count? at federal level? at regional level? at province level? at county level? at town level? at neighborhood level? and so on.

try wearing Spanish boots of Spanish leather... and then walking back a ways on the forgotten viaducts of your own history. To the point where the presaging of modern -rule by decree from Brussels- is found in the midadventures of Charles 1 the Woebegone, who left a Dutch bishop to rule in his stead, while he wandered off to play "holy roman" something or other.That bit of arrogant misrule created the Comuneros movement, which lead to a widespread, armed revolt by a coalition of social forces, from merchant, to peasant, artisan and guildsman - all united in common cause to drive out the tax farmers, indigent nobility and various and sundry court hangers on whose lifestyles were dependent pon the draining of socieities lifeblood.

"In city after city throughout Castile between April and May 1520, royal representatives, bureaucrats, and staffers were ejected as the comuneros made good on their threat to form provisional governments. The individual comuneros subsequently united to form a junta (a union, or board) and sent a letter outlining their intentions to the absentee monarch.
The implicit goal had been reform, but perhaps recognizing the inherent contradiction in notions of "good government," comuneros in Toledo furnished the most radical idea yet: to move forward with "no legal government"; a proposal to form a "congress of cities" in a "radical programme" characterized by a "spirit of compromise" in place of coercion.The comuneros would create a network of self-governed, independent city-states which would trade freely among one other, bound by a loose mutual-defense pact, emulating the small, autonomous microstates of the Italian Republic."

There can be no doubt that Rajoy and the silverware socialists in Madrid rule as dogsbodies of the Brussels HQ, which is nothing but a satrapy of international finance capitalism, and that past is prelude to future...a future where 'the STATE' in all its' multiferous and omniverous guises, is consigned to the dustbin of history, replaced at last by the functional local democracies which were already the mainstay of what you think of as "Spain" long before that entity existed.When  the family of Federico Garcia Lorca, the poet whose assassination by fascists at the outbreak of the Spanish Civil War  symbolised the terror which would envelop all of Europe, finally secured a death certificate in 1940, it stated that he had died of "war wounds" - the implication being that he had died on the battlefield, not at the hands of falangist terrorists. If the Euro-proxy central government further mishandles the crisis in Catalonia, in echoes of the "May Days" counter-revolution by the Stalinists and their socialist sidekicks in Barcelona 1937, it will be Spain itself for whom the death certificate is issued, killed by a self-inflicted slash of it's own throat, in a dark traji-comedy only "the Duende" could bring about! To Lorca, therefore, the last word must belong -

"In Spain, the dead are more alive than any other place on earth. Their profile wounds like the edge of a barbers' razor."

In reply to by Don Diego

Teja BennyBoy Mon, 09/25/2017 - 11:10 Permalink

Good question. And they should be subtracted from the supporters of the "Spanish" position against any referendum.Just visited Bilbao, Basque identity very visible there, especially during their Semana Grande festival. My guess is - sooner or later, yes, they will get a referendum, too.Or all of Spain will get a referendum to turn into a federal republic. That would be the best solution for all.

In reply to by BennyBoy

Don Diego back to basics Mon, 09/25/2017 - 07:36 Permalink

I already do, if you knew anything about Franco's biography my avatar would have already given you an indication. Since my avatar does not tell anything to you then I assume you are absolutely ignorant about Franco and you are just mouthing off platitudes. It is alright, nobody knows about everything but when you do not know about a subject, the best is to shut up until you learn.

In reply to by back to basics

fleur de lis Don Diego Mon, 09/25/2017 - 08:35 Permalink

Don't waste your time trying to teach BtB anything.He/she should take his own advice and go back to basics and do some real research.Insteat, he spouts what he learned in his NWO "history" books.He probably thinks that the brutal Spanish Civil War was about freedom and not NWO subversion from within, funded by the Federal Parasite Reserve, and fought against Spain by international Marxist misfits looking for a bloodfest.Divide et Impera.Franco saved Spain from the Communists.  

In reply to by Don Diego

BobEore fleur de lis Mon, 09/25/2017 - 10:04 Permalink

Franco saved Spain from the Communists.

Incorrect, revisionist history.

\the communists/socialists saved Franco from the real Spain... and Franco saved the commie/socialists from the real revolution.

Underneath the polemical smoke and mirrors, ALL statists are the same. Left, right, right left... lockstep in marching to the beat of international finance capital.

Nice try tho bro!

In reply to by fleur de lis