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Have the European election results caused more uncertainty?

31 May 2019

People across the European Union (EU) cast their votes last week for the parties they wish to represent them in European Parliament. The far-right populist and nationalist parties strengthened their position in the European Parliament, whilst the pro-environment, pro-EU Green parties were the surprising success story. The Greens posted strong gains in Portugal and the UK, finishing third in Luxembourg and France, and having their best-ever results in Finland and Germany. Five years ago, the Green Party finished third in Germany. This time around, they doubled their share of the vote and comfortably took second place. For the first time in history, they beat Germany’s traditional, centre-left Social Democratic Party in a nationwide election. Their surge in popularity appears to be part of a much wider trend. It can be argued that traditional parties have disappointed too many people, one too many times. Environmental activism and worries over climate change are certainly part of it, but more broadly, the Greens have managed to articulate a vision on social and economic issues that is pro-immigrant, and pro-Europe.

Whilst support has gone to the fringes, Europe’s centre has caved. The centre left and centre right have lost their absolute majorities for the first time since 1979, when the first European parliamentary elections were held, effectively ending their 40-year majority.

The elections were, as mentioned in previous CIO Question Time blogs, much more a story of 28 different local elections rather than one collective European narrative. In Italy, Salvini consolidated his party's power after the 2018 Italian elections. In Germany, frustration with the coalition led by Angela Merkel contributed to a surge of support for the Greens. France witnessed a rematch of the 2017 election between Le Pen and Macron, this time with Le Pen just edging out Macron; and in the UK, the elections were another referendum on Brexit. Nigel Farage, the former head of the UK Independence Party (UKIP), and his newly formed Brexit Party, placed first in the elections, capturing Conservative voters disillusioned with the soon-to-be-departed Prime Minister Theresa May and her party’s handling of Brexit. The Liberal Democrats, a pro-Remain party and supporters of a second referendum, came in second. The Labour Party came in third, and the Conservatives came in fifth. With the UK’s two main parties falling behind two others with clearer, although differing, visions of the UK’s relationship with the EU, this was seen by many as an indication that UK voters are fed up with the establishment. However, given the comparatively low turnout (37% for the European elections vs 72% for the referendum in June 2016) it seems a stretch to believe that the same preferences will be demonstrated at the next general elections.

So whilst millions voted in the world’s second largest election to pick their representatives for the European Parliament, their concerns (and their votes) had far more to do with the political debates and divisions back home than anything else. As a result, fragmentation will come to define the new European Parliament. Considering the current make-up of Parliament, passing new policies will be difficult. As dramatic shifts in policy, which tend to unnerve investors, are less likely in this environment, markets should continue to hold up reasonably well. However, if the extreme parties continue to entice more voters in the future, businesses could face an increasingly uncertain environment, across Europe and much of the rest of the world.

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