Far‑right surge shakes European markets after EP elections
The far-right achieved significant success in the European Parliament elections, and its influence was substantial enough to affect European stock exchanges. Analysts at XTB believe that the growing popularity of the far right increases market uncertainty.
The elections to the European Parliament are already over. The largest faction in the EP will remain the centre-right European People's Party (EPP), which won 184 seats. Second place went to the centre-left Progressive Alliance of Socialists and Democrats (S&D), with around 139 seats.
Far-right parties achieved significant success in important European countries, leading to a political upheaval. The National Rally (RN) achieved a record result in France, taking first place with about 31.4%. In Germany, the far-right AfD became the country's second most potent political force. In Italy, the ruling party, Fratelli d’Italia, won, strengthening its position.
As a result, the far-right Identity and Democracy (ID) is expected to receive up to 58 seats in the EP. However, the success is not irrefutable. The far-right failed to surpass either the less radical Eurosceptics from the European Conservatives and Reformists (ECR) or replace the liberal Renew Europe as the third force in the parliament.
The far right is gaining strength. "Potential change of direction"
Economists have no doubts that maintaining the status quo in European politics will be difficult. It is not true that nothing has changed, even though the balance in the parliament has essentially remained the same.
Experts from XTB claim that a shift in general European politics to the far right could lay the foundations for a potential change in the EU's policy direction from integration to greater splits between countries.
It is difficult to speak of a radical change of direction for now. Still, for the markets, even the vision of potential isolationist moves by individual countries creates higher uncertainty about integration and cooperation within the European community. Increased risk is often associated with declines, which we see today in the markets of the Old Continent.
The clear trend is the turning away of voters from parties leading in the green transformation, which is reflected in solid price drops of companies in this sector.
Green deal to the bin?
What might the EU's policy direction change look like in practice? These elections will have significant implications for future EU decisions. The Green Deal, in its current form, is practically dead. The European Commission went decisively too fast in directions not recognized by a large part of societies.
Meanwhile, the Green Deal is still one of the most important goals of left-wing circles. Esther Lynch, General Secretary of the European Trade Union Confederation (ETUC), described this in an article published on the social-democratic think tank portal Social Europe. Lynch appealed for the realization of the "project of hope."
It aims to ensure high-quality jobs, improve working conditions and pay, provide affordable housing, provide more accessible public services, and ensure a fair energy transition. This underscores fears that the new EP will marginalize these ideas.
Economy more important than climate?
So far, the EU authorities have not convinced the community's citizens that the fight for the climate is the most important. This is confirmed by a survey conducted by the polling platform Focaldata on 6 June, the day the vote in the EP elections began, on a sample of 6,000 citizens from Germany, France, Italy, Spain, Poland, and Sweden. The data quoted by Reuters were not surprising from the perspective of the final results.
In France, Italy, and Poland, voters believed that it was the economy that most influenced their vote, with immigration coming in second in France and war second in Italy and Spain.
The respondents also identified improving the economic situation and reducing inflation as the main problems. They also pointed to military threats and migration issues.
Climate change issues are strongly emphasised in EP politics and ranked fifth in the survey.
Election results affected indices
France realized the election results might impact the economy. In response, President Emmanuel Macron announced early elections. The biggest winner was Marine Le Pen and her National Rally, which is expected to win up to 30 seats, while President Emmanuel Macron's coalition only won 13. In response to the result, Macron announced the dissolution of the National Assembly and early parliamentary elections on 30 June and 7 July.
This caused declines in the Paris stock exchange. On Monday morning, the CAC 40 index fell by over 2% before recovering some losses. The level of 7855 points reached in Paris was one of the worst in Europe.
The outcome of the European elections have caused a ruction in European politics. No one expected France to call parliamentary elections on the back of the EU elections, so the shock factor may weaken the euro and European stock markets at the start of the week - stated Kathleen Brooks, head of research at the trading platform XTB, to "Le Monde".
The Frankfurt DAX lost 0.7% to 18,428 points, the Milan index fell by 0.8% to 34,376 points, and the Amsterdam index decreased by 0.5% to 919 points. The pan-European Stoxx 600 declined by almost 0.7% to 520 points. On the London Stock Exchange, outside the EU, the FTSE 100 dropped by 0.6% to 8,199 points.
As "Le Monde" points out, markets across Europe, along with the euro, plunged on Monday after the far-right parties' victory in the European Parliament elections.
The fight for the most important positions has begun
What's next? Immediately after the official election results are announced, the battle for the most important positions in the EU will begin. Ursula von der Leyen, the current President of the European Commission, will need 361 votes to be re-elected. Many indications are that she will once again chair the European Commission. Forecasts suggest that centrist parties (EPP, S&D, and Renew) will collectively win 403 seats. The vote will take place in July or September.
The result of the European Parliament elections has deepened trends that were visible five years ago. The election results show the effects of the COVID-19 pandemic, the war in Ukraine and the Middle East, and concerns about immigration. They have led to increased support for the right in some member states.
