The views expressed are the author's own.

Although it appears Emmanuel Macron will probably win the French election, that does not mean he will be able to govern effectively, nor that Marine Le Pen will have no influence on legislation. Macron does not represent a established party so his nominees for Parliament are followers, but not part of a party apparatus. It is as though Trump ran as an independent and had a bunch of non affiliated people run for Congress. Le Pen will pick up seats in Parliament and maybe a material number, but enough to be a force to reckon with for legislation, not unlike the Freedom Caucus.

France economically is in bad shape, with 10% or worse unemployment, weak banks, massive over-regulation, excessively high taxes, and low productivity. Unless there is massive change of the type Trump is attempting to push through, France will continue to wallow and, while maybe improving slightly, will not really see a material improvement in the economy. Macron claims he intends to change many things to get rid of the tax and regulatory burden, it remains to be seen if the traditional politicians in Parliament go along or not. Italy had elected a similar reform-minded Prime Minister, but when he tried to push through badly needed reforms he was soundly defeated. In France, riots have already begun to protest changes to the workweek and retirement entitlements, before they are even introduced. It is very similar to the US where there were violent riots right after the inauguration and there continues to be massive Democratic and main stream media attacks on Republicans trying to take away Obamacare and to deregulate many industries. As we know, once you give away freebies to voters, it is very hard to take them away even when, as in Obamacare, they are a disaster. A material percentage of the general public in the US seems to think Obamacare works well, despite coverage being unavailable next year or barely available at huge premiums and high deductibles. Most of the public is either clueless, or they do not pay tax and they are oblivious to the massive cost of the taxes to keep it alive or the damage it is doing. The same is true in Europe only worse. There they have been given massive entitlements and labor law makes it almost impossible in many countries to fire anyone. Healthcare is free and there are all sorts of subsidies. Plus vacations are four weeks or more and working hours are 35 per week in France and other places.

So now reformers like Macron get elected, but are not able to effectuate any real change. This is where Europe is right now. Many major decisions on treaties etc in the EU is by unanimous vote of the 27 governments, so we now see the Brexit negotiation being subject to the vote. This is not going to change. That makes getting anything done very difficult leaving the vast bureaucracy in charge. Not a good way to effectuate change. It also means Brexit is very likely to get nasty and messy and be a hard Brexit. This will create more uncertainty and turmoil for the EU and probably the Euro.

Bottom line for CRE investors in Europe, it is still not worth the risk reward when compared to the US. While I am sure some PE funds have made good deal, the decline in the Euro, general political dysfunction, and the refugee influx, leave Europe subject to much more bad news, just when we see that maybe Trump will really get massive tax reform draining maybe $2 trillion cash out of Europe by 2018, and maybe the deregulation that the Republicans are instituting will get done, and the US economy will thrive possibly. My assumption is the Republicans will pass new healthcare, tax reform and infrastructure programs. That will drive the US economy ahead while Europe still struggles and continues to have political upheaval. The risk reward in the US is far less than it is in Europe.

The views expressed are the author's own.