By Yusra Barmaz


There is a school of thought that says all empires will eventually fall: the Roman Empire, the Ancient Egyptians, and of course the USSR. Might the next bloc to fall be the EU? The force which brings most empires tumbling down is usually an obsession with over centralisation and standardisation, which in turn leads to unhappiness amongst their diverse populations as nations feel their customs and identity being trampled underfoot. This is likely to then prompt an upsurge in protests, such as the growth of nationalism. Perhaps this is what we are starting to see in Europe, too.

The UK voted for Brexit and to leave the seemingly successful embrace of the EU because its population felt crushed by Europe, they thought their way of life and proud legal traditions were both under threat; the Scots were narrowly persuaded to stay with in the UK and in Spain, the future of Catalonia as a part of Spain looks unsure as we write. All across Europe, we are seeing the emergence of decentralising forces. Yet the response of the centre is not to address these concerns head on and defeat them. A political elite that listens might offer to loosen the ties binding us, or offer a “pick and mix” approach to being a member of the European empire. A listening, adaptable, sensitive elite should not become more entrenched and demand more centralisation, but this is exactly what seems to be happening. Take Germany, for instance, one of the core demands of the SPD politicians is more European centralisation, if they are to support Merkel in her new government. Driven by the Franco-German axis, Europe is becoming less tolerant of individual identities and independent thought.

Meanwhile, elsewhere in Europe, we forget that the recently established democracies which joined the EU from the east, countries such as Poland, the Czech Republic, Hungary, the Baltic States, these were all countries which lived under the yoke of communism up until just a few years ago; less than 30 in fact. Their freedoms were hard won and the memory of central rule still burns brightly in the minds of many, so the EU drive towards an ever more autocratic approach is starting to ferment feeling of unease and yes, a resurgence of nationalism here too, as these countries feel their way of life and identity is under threat. Look at Hungary and their reaction to the influx of refugees for evidence. Add to that the recent changes in the Austrian political landscape and we might see a new alignment of ‘Mittel’ Europe along the geographic lines of the old Habsburg Empire.

What might be the economic implications of these shifting geo political forces? For entrepreneurs and wealth generators, what does this mean for you? At ZEDRA we take a global view and we have a long experience. We see the world not just from a European perspective, but rather from a global one, whether that is a US, LATAM, African, Indian or Asian standpoint. We see events unfold in one part of the world and transfer that knowledge and experience to others. So right now, we see that the LATAM countries are volatile and the politics there is unstable. What is happening? Capital is flowing into the USA and parts of Asia in huge quantities; a flight to safety is evident. This capital does not like what it sees in Europe, it sees CRS, over regulation and an erosion of privacy which risks undermining personal safety and security. It sees a Europe rushing towards a “one size fits all” centralisation, turning its back on wealth generation and the entrepreneurial spirit so essential for its future.

As Europe creaks under the strain of Brexit and our politics becomes less stable, less predictable, the job of the wealth preservation industry becomes even more important. High quality offshore jurisdictions are likely to be the winners, as the world’s successful elites choose to move their capital to safer, well-regulated centres.

For corporations, the outcome could be different. In the USA, we see the beginnings of the Trump tax reforms and the rollback of some of the more restive corporate tax regimes. This should prompt a flood of money re-entering the USA, where no doubt the Trump administration will agree to a tax “holiday” for companies remitting funds held offshore. Apple alone is estimated to have $250 billion offshore, add in all the others and the sums could be huge. The stimulus to the US economy will be real, with cash likely to flow to shareholders and staff in the form of higher wages which might eventually contribute to higher inflationary pressures. Expect the US economy to benefit from this one off injection of money, assuming the politicians get it right.

So 2018 is shaping up to be a year of significant change and risk. Wealth planning and preservation have never been more relevant. Here at ZEDRA, we are ready. With our team of experts at your side, I am confident ZEDRA is well positioned to deliver the support our clients require in these fast moving times. As political risk enters the mix for many, the next few months are bound to be nervous times. However, our clients’ businesses are built on long term foundations and with long term objectives in mind. At ZEDRA, too, our perspectives are focussed on the long term.

 

Bart Deconinck

ZEDRA Deputy Chairman

December 18, 2017