Following last week's European elections, our economists are anticipating major national upheavals. Expect increased pressure on Italy and France, as well as on stock markets.
Major national upheavals expected after European elections
We are expecting the strengthening of right-wing national parties in the European elections on June 6 and 9, 2024 to lead to major national upheavals. In our analysis, we expect increasing pressure on Italy and France as well as the stock markets.
According to our economists, the results of the recent European elections will lead to greater political and economic uncertainty and national upheaval. The starting point for the analysis is the new majority in the European Parliament.
Political and economic implications
While the conservative parties of the 27 EU member states, united in the European People's Party (EPP) group, performed strongly, the Group of the Progressive Alliance of Socialists and Democrats in the European Parliament (S&D) was able to maintain its position. Both groups still have a majority. However, both the centrist Renew group and the Greens/EFA suffered heavy losses. In contrast, the authoritarian and nationalist forces in several countries increased their share of the vote.
One of the resulting risks is the uncertainty regarding the exact composition of the parliament, as it is not yet clear which European political groups 100 non-attached MEPs will join. The rise of the far right has increased uncertainty about the future political direction of Europe, providing fertile ground for anti-European movements on the left and right fringes.
In France in particular, political uncertainty is increasing after President Emmanuel Macron dissolved the National Assembly and called new elections in response to the heavy defeat of his centrist coalition. The new parliament is likely to be even more fragmented than the current one, which could lead to institutional gridlock.
Pressure on the state will therefore increase, particularly in France, but also in Italy, where budget deficits are significantly higher than expected. This will increase the pressure on country risks. The impact on government bonds is already evident and the interest rate environment is likely to remain restrictive for some time to come. We also expect the equity markets to be more volatile, at least until the outcome of the French parliamentary elections.
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