European stocks are currently on their second consecutive day of going south, driven by the heightened spread of the coronavirus outside of China and also by the EU budget impasse in negotiations.
European leaders are currently debating the next long-term budget of the bloc. However, the talks seem to have hit an anticipated dead-end, as two opposing camps are clashing over the issue of an appropriate spending proportion from the bloc's overall GDP.
The wealthier states such as Austria, the Netherlands, Sweden and Germany, which are contributing more to the EU budget than they receive, are demanding for more balanced budgeting, in which all member-states pay proportionately.
On the opposing camp are the poorer countries or “net-receivers”, which demand from their wealthier counterparts to fill the gaps in the budget that have been left by Brexit.
The EU budget is an imperative instrument supporting the general cohesion in the bloc, which is used to promote equality across all member-states. Even more so, it is also used to help poorer countries catch up to the more advanced and wealthier economies in Europe.
In that sense, the budget is central for the successful implementation of EU policy; however, the ongoing disagreements raise concerns alluding to the likely political fragmentation in the bloc, which could have a cascade effect on the overall stability.
These disagreements on the EU budget talks come shortly after the finalisation of Brexit, which some perceive to be further proof that the EU is suffering from both internal and also external political pressures. These are curbing growth and are also weighing down on European stocks.
Meanwhile, the Euronext 100 tumbled by 0.91 per cent so far into today’s trading session, and the expectations are for the bearish downturn to continue until a considerable breakthrough in the negotiations is achieved.
The index broke down below the regression channel’s lower boundary and the 23.6 per cent Fibonacci retracement level at 1167. 45, and the downturn is likely to resume at the start of next week’s trading session.
N100 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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