A silent war is unfolding in Europe and its outcome will define the acceleration or the reversal of the current disintegrative tendencies.

The last couple of years were marked by the rule of bureaucracy in the European Union. The bureaucrats have seized power and have done everything in their reach to avoid changes in status quo, even if this meant a decade of stagnation for most EU members. In this regard, it reminds a lot what happened in the Soviet Union after Khrushchev.

While the absolute rule of bureaucracy lasts in Europe, we won’t have economic growth. We’ll just keep moving between crisis.

The first battlefield: Sanctions to Portugal and Spain

However, the tide might be quietly turning. Jean-Claude Junker is now the president of the European Commission. JCJ is no bureaucrat, he is an old school politician familiar with political twists and turns.

I believe he was fundamental for the dismissal of sanctions that, otherwise, would be applicable to Portugal and Spain for missing fiscal targets, in 2016. This would be a reflexive process because sanctions, like freezing European funds, would result in an economic slowdown and a fiscal miss in 2016, i.e., sanctions would, ultimately, generate more sanctions.

Obviously, if that happened, worsening conditions could bring Portugal close to another bail-out. JCJ, the experimented politician, saw that coming and did everything in his power to avoid such an outcome. However, most of Brussels elite is composed of bureaucrats that can’t see that much, which ended up resulting in a close fight and a slim victory by JCJ.

The bureaucratic machine strikes back

The problem lies on the heavy weight represented by the bureaucratic faction in Brussels. EU’s bureaucratic profile is noticeable everywhere and it won’t disappear overnight. This is especially visible in the tax rule against Apple. Instead, of understanding what’s wrong with the current tax rules, eurocrats limit themselves to the enforcement of blind and outdate rules.

This might turn out to support the Brexit faction because it opens the door for several enterprises to move from Ireland to the UK. While before the Brexit, everyone waived the threat of businesses leaving the UK, now an independent UK may have more arguments to attract business.

If the UK succeeds in working as a safe-haven for international corporations, other EU members might fall into the nationalistic rhetoric and opt-out the Union.

Therefore, the unfolding of the current historical process points to further problems in the Eurozone. European equity markets are poised to keep a sluggish performance. I maintain my view of investing elsewhere. It will be a long time before we can have a strong conviction on which side will win this war.