Daily Management Review

What will happen to European populism in 2018?


The establishment can breathe a sigh of relief, looking back at the political events in Europe in 2017. Yet, it's too early to celebrate the victory just now.

Blandine Le Cain via flickr
Blandine Le Cain via flickr
Europe has been freed from a number of supposedly "worst-case scenarios", including the presidency of Marine Le Pen, Merkel’s failure, victory of Geert Wilders, but, as Goldman writes in a recent review, the wave of nationalism and populism in Europe so far rested.

Former European Commissioner Pascal Lamy confessed earlier this year: "Euro-skeptic politicians basically follow the impulse of internal sentiment: the society is now less optimistic about Europe than ever."

Allison Nathan of Goldman writes that the most immediate political risks of the euro zone, that is, the risk of winning the key elections this year in populist parties, have not materialized. However, these movements continue to gain momentum. 
In the March elections in the Netherlands, the nationalistic populist "Freedom Party" showed worse results than during the polls that were held before the elections. Yet, the party still received more votes than the results of the 2012 elections. It remains the second largest party in the parliament.

In France, optimism about the reform program of Emmanuel Macron replaced concerns about the prospect of Marine Le Pen’s victory. However Le Pen showed the best result for her party in the presidential race.

In Germany, the CDU/CSU block of Chancellor Angela Merkel retained the largest number of seats in the Bundestag, but it was joined by the extreme right-wing party "Alternative for Germany" (AfD), gaining 13% of the vote.

In other European countries populist parties have shown good opportunities for participation in government coalitions.

And here are a few more observations and lessons learned from recent European events in the gloomy days of 2017.

The transition from the election campaign directly to the leadership was difficult. The increasingly fragmented political landscape of Europe complicated creation of coalitions. It took more than 200 days to form a new government in the Netherlands.

In November, negotiations on the creation of a German coalition with the Green Party and the FDP fell through. But, having resolved to turn to the opposition, the Social Democratic Party of Germany - former partner of Merkel for the coalition - decided during the congress last week to begin negotiations with the CDU/CSU. Negotiations were to begin this week.

The situation with other sources of uncertainty remains unresolved. Spain continues to fight the confrontation between Madrid and Catalonia. The United Kingdom and the 27 EU member states seem to agree to hold the first stage of negotiations on the Brexit issue. UK lawmakers recently voted to amend the Brexit bill, which will guarantee parliament a vote on the final agreement agreed with the EU.

Reducing political risk has strengthened European assets, although fundamental factors probably played a decisive role. As a result of market-friendly election results in France, a peak of growth was achieved in Europe, supporting European stock markets.

The inflow of the US to the European stock market has grown significantly, but has since stabilized, showing acceleration in growth and a reduction in the risk premium. Avoiding political risks also contributed to the strengthening of the euro, which this year increased by 12.5% against the dollar. Considering the currency movement, SXXP grew by about 7.5% in local currency and by 20.6% in dollar from the beginning of the year to the present.

source: reuters.com, ft.com