Unchanged support for EUR before Brexit but optimism about EU’s future is lower – Danske Bank

Pernille Bomholdt Henneberg, Senior Analyst at Danske Bank, notes that the European Commission’s Spring Eurobarometer survey shows unchanged support for the euro as a common currency.

Key Quotes

“However, the survey should not completely remove the concern that Brexit will increase political uncertainty in the EU as it was carried out before (21-31 May) the UK voted to leave the EU and as the negotiations between the UK and EU have still not started.

This said, the survey confirms a significant difference between the UK’s (17%) and the rest of the EU’s (55%) support for the euro as a single currency, suggesting a low likelihood of other potential EU leavers.

Lowest EU optimism since debt crisis

• At an EU level, the optimism about the future of the EU declined further to 50% in spring 2016, from 58% a year earlier. This brings the optimism to the lowest level since the debt crisis in 2011-12.
• In Germany in particular, the optimism about the EU’s future has weakened and it remains below crisis levels after declining sharply in autumn 2015.
• Immigration is still seen as the most important issue facing the EU followed by terrorism, which is considered more important than in the autumn. These are both considered more important issues than unemployment and the economic situation.

Limited economic and financial impact of political uncertainty: Resilient economic and financial sentiment

• The economic and financial impact of the political uncertainty related to Brexit has so far been fairly limited with resilient economic surveys and a quick recovery in Euro Stoxx 50 back to pre-Brexit levels.
• Economic sentiment in particular has been remarkably resilient to the sharp fall in the economic policy uncertainty index, which is based on the frequency of newspaper references to policy uncertainty.
• We still expect a hit to business sentiment, which would result in lower investments, as it is still early days and a long period of negotiations may drag out the uncertainty.”