4 Key European Elections That Will Impact the Economy in 2017

4 Key European Elections That Will Impact the Economy in 2017

After a year characterized by Brexit, a migrant crisis, populist movements and the election of Donald Trump, uncertainty in the European Union economy is high.  While economic data has remained resilient thus far, politics will likely stay in the spotlight this year and threaten confidence as a number of high profile economies hold elections, including France, Germany, The Netherlands and Italy. In a context of waning support for the status quo and recent election polls failing to predict results, Senior Economist Angela Bouzanis takes a look at the upcoming votes we are keeping an eye on and why.

The Netherlands: Parliamentary Election

When: 15 March

Snapshot: Polls suggest that the country could take a profound shift to the right and the Party for Freedom (PVV)—a Eurosceptic, right-wing Populist Party—is predicted to come out on top.

The Bottom line: The fragmented nature of the Netherlands parliament makes it unlikely that the PVV will take power. A number of the mainstream parties have stated that they will not cooperate with the PVV, likely leaving them out of the ruling coalition, however, the Dutch consensus-building tradition will get tested and the country could enter more confrontations with the EU.

France: Presidential & Legislative Elections

When: Presidential First round: 23 April | Legislative: 11 and 18 June

Snapshot: Far-right candidate Marie Le Pen’s popularity has sparked fears that France could be the next country to do a post-election policy 180.   

The bottom line: Le Pen is unlikely to win in a second round vote and recent polls suggest her momentum is waning. Chances are that France could elect a new President who favors fiscal consolidation and reforms—a positive for the country’s outlook. The French economy has suffered from a lack of competitiveness and is on a weak growth trajectory, making the economy a top priority for the new leader. Presidential elections will also serve as a test of mood, ahead of June’s parliamentary vote.

Our recent piece on Debt and Deficits in the Eurozone provides insight into France’s economic challenges.

Germany: Parliamentary Elections

When: Fall 2017

Snapshot: Chancellor Angela Merkel will seek a fourth term as head of the Eurozone’s largest economy.

The bottom line: The refugee crisis has dented Merkel’s and the CDU’s support and the race is likely to be tighter in the face of rising populism. While Germany is expected to remain in the hands of a moderate government, a fractured Bundestag could lead to a need for another Grand Coalition and affect policy making going forward.        

Italy: Parliamentary Elections

When: Date not yet set

Snapshot: Italy could see an early election after the resignation of Matteo Renzi last year.

The bottom line: A new electoral law needs to be written before elections can be held and parliamentary factions are far from agreement on new voting rules, complicating the timing of the new vote. The current government is transitional in nature, but the country’s pressing structural problems require reform minded leaders.

Outlook

The crowded election cycle will keep political uncertainty high in the European Union this year and changing leaders could complicate the EU policy agenda. Brexit, Greece and the refugee crisis are ongoing issues that need to be tackled and the new political leaders will be key in determining how they proceed. In addition, this election cycle is likely to be impacted by growing populism, which could challenge the status quo (for more information see our article on populist sentiment). Despite these political challenges, the FocusEconomics panel sees the recovery continuing this year and expects GDP to increase 1.5% in the Eurozone.  

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Author: Angela Bouzanis, Senior Economist

Date: January 18, 2017


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