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Ok, let's have a quick quiz. Who is José Manuel Barroso? I thought he may be the Benfica goalkeeper, but if you answered President of the European Commission (EC) go to the top of the class. The fact that Senhor Barroso has been President for the last ten years and I had never heard of him might say more about my ignorance than I would ideally like to be made public, but hopefully it says more about the anonymity of the EC.

Of all our layers of government the EC is the one that I feel is most remote and unaccountable. Do you know if your MEP is doing a good job? I don't. I don't even know who mine is. Yet next month we get the chance, along with the rest of the EC, to elect a further 715 MEPs to the European Parliament to make decisions that will undoubtedly have an impact on our lives, although I am sure very few of us know what. Wait a minute - that's a lie. I am aware they are responsible for a lot of the bumph that we have to send to you as clients and I am sure you all read avidly.

Given the difficulties the Eurozone has had since the banking crisis started in 2007 it is rather strange that our elected officials for the region have not been more prominent. Certainly it has been the European Central Bank that has been at the forefront of dealing with the fallout of the banking crisis and the pronouncements by its President Mario Draghi, who I would suggest is better known than Senhor Barroso, that has brought most stability to the area.

To be fair, it is not unusual for politicians to try and keep a low profile when things are going wrong, but I have a feeling that the next EC President, who will be chosen after the elections, may be far keener to pop their head above the parapet as there are definite signs that things are starting to improve on the continent. So why has this happened? Is it due to the diligence of our elected representatives in Brussels? Probably not. Instead the main reason for improvement is more to do with market forces and economic cycles than decisions made by politicians. For example, Spain still has a very serious unemployment problem, but unlike some other countries their unemployed are in general very well educated. This proliferation of intelligent and cheap labour means that more and more companies are starting to look to Spain as an alternative to investing in Northern Europe where the labour costs are higher.

Greece is expected to finally see an increase in its economy this year having seen it shrink by nearly 25% since 2008. It is also anticipated that the Portuguese economy will increase and unemployment reduce for the first time since the banking crisis.

So what of Italy, the "I" in the PIGS acronym used to describe the worst affected countries in the EC? It has justifiably been suggested that Italy is replacing Greece as the sick man of Europe. Certainly it does not seem as if financial reality has sunk into the Italian way of life. By way of example, Southern Italy has a climate every bit as temperate as Spain, but only 13% of all visitors to Italy venture south of Naples. So what is the Italian Tourist Board doing to attract visitors and their bulging wallets? Well, not a lot as it was revealed that 98% of the Board's budget is spent on staff salaries! No wonder 15 times as many Germans take their towels to the Balearic Islands compared to Southern Italy.

However, leaving Italy aside, it does appear that the worst is over for the rest of Europe and although it is likely to be a bumpy ride, as an investment opportunity it is one that may be worth voting for.

NEIL WOODFORD

Finally, as you may know, Neil, who was the manager of the extremely successful Invesco Perpetual Income and High Income Funds until last month, is launching his own investment company. He is coming to see us in a couple of weeks and no doubt next months' missive will give you our views on his future plans.

Steve
Author
Steve Forbes
Managing Director
Alan Steel Asset Management Ltd is authorised and regulated by the Financial Conduct Authority

The Financial Conduct Authority does not regulate tax advice

This letter is the personal view of Steve Forbes. Please check the appropriateness to your individual position with your adviser before taking or refraining from any action.