By: Yale Bock
Over the last few weeks, protests across the major Western European countries have shown increasing discontent with economic conditions in the region. Much destruction of property took place in high-profile areas of London, Paris, and other major cities in Spain, Portugal, Italy, and Albania. Societal discontentment has implications for national and regional government policy and financing costs for governments, businesses, and citizens. In looking at ten-year bond yields across Europe, they have risen approximately 30-40 basis points in the last month and 70-100 basis points in the last year. Germany is considered the strongest economic country in the bloc, and the ten-year bond yield is 3.50% in that country. France and Italy’s ten-year yields trade at around 4.40%, while Spain’s comes in at 3.90% and Portugal at 3.80%. Greece’s borrowing costs sit at 4.20% as of this writing. As a basis for comparison, US ten-year bond yields are a touch under 5%, but that is a bit misleading, as that yield has jumped about one percent in the last month. I would note the US change is for reasons not related to country protests.
An important question that needs to be asked is related to energy policy in any country. Energy is a critical input in many parts of the economy, so if a country’s energy policy makes it more expensive to do business, it trickles down and will affect inflation numbers and policies related to interest rates. In combination with regulatory policies toward financing and banking, well, one can make the argument that some regions lean more toward self-destruction than constructive enablement.
Europe has long been an exceedingly difficult region for investors to earn higher risk-adjusted returns. Let’s just say it is an economic environment where capitalists are not given priority. A few prominent examples that come to mind include the legal history and treatment of large technology firms in the search and advertising area, as well as the current approach to large energy companies. In case you were not aware, in the UK, the largest integrated oil companies pay a windfall profits tax of 78%, called an energy profits levy, on drilling in the UK or on the UK continental shelf. If you put yourself in the place of an investment firm that manages quite a bit of capital, is this where you would want to own companies?
One follow-up: I mentioned the Brazilian elections in a prior blog post, and how the preliminary result would be a move towards a freer market approach with Lula losing power. Naturally, Lula reversed many years of election results with a surprise, some would say a questionable victory, and that dream of less government and a heavier market-based economy is now gone. Remember that quote about Brazil always being the next great country? Yes, we know why. The Bovespa index dropped 20% the next day.
Originally posted on November 1, 2026
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