EU looks worried about the economy now

The Rise of Eurosceptics: Why Markets Need to Worry About the EU Elections

Posted Saturday, May 25, 2019 by
Skerdian Meta • 2 min read

The EU elections are upon the world and investors are worried about Eurosceptics increasing their seat share this time around. According to their expectations, Eurosceptics could grab around 30% of seats in these elections. The conservative parties in the European Parliament are larger in number – they account for around half, including Eurosceptics, while the Left/Liberals occupy the other half of the parliament. But if the Eursceptics add more seats as they are expected to, then things will get complicated.

There are quite a few things which could affect the European elections as listed below:

  • Eurosceptics on the March – The immigration crisis is the most evident and the Eurosceptic countries have gained considerable support across the continent. The German AfD has gained many seats in the last European election and they will likely increase their seat share in the EU Parliament. In Sweden and Austria also, the conservatives are on the advance.
  • Italian Anti-Euro government – The de-facto Prime Minister of Italy Matteo Salvini is a Eurosceptic and he will increase the share of Italy’s conservatives. In fact, he is on a campaign in Europe to help the Right wing parties such as Marine Le Pen in France. He was seen supporting her in her campaign in France a few weeks ago.
  • Situation in France – Speaking of Le Pen, the situation in France has been terrible recently. The Yellow Vests protests have been going on for months and they are mainly about immigration. Now Le Pen threatens Emmanuel Macron to take the first place in France which will also be a sign that she will probably win the next presidential elections in France.
  • Brexit and the UK – The UK will also participate in the European elections despite heading out of the union soon. The way things are going, the UK electorate will likely vote for the conservatives and the Eurosceptics. They were pretty infuriated with the EU three years ago when they voted to leave, now they are even more so considering that Brexit has been pretty hard so far and it will possibly get harder without a deal. Why not leave a bunch of Eurosceptics in the European Parliament to fight the battle from the inside?

Why does this concern markets? For starters, it could make passing important European legislation more complicated and could make it harder for the EU to stand united in the face of escalating trade tensions. Some say it might bring an end to the union as we know it, but I don’t agree with this. They might even strengthen the alliance actually. If Eurosceptics and conservatives take more than half of the seats, some of the tensions in Europe might even settle, such as the clash between Italy and the European commission

Besides, this group has also called for easing fiscal rules in the Eurozone region, a move that could definitely put Italy’s debt crisis in the spotlight. If Italy’s Deputy PM Salvini’s League secures good results in the upcoming elections, he would try to negotiate with Brussels and wrest his way to increase the country’s debt. Italy’s GDP is expected to be at 0.3%, much lower than the initial estimates of 1.5% from the Italian government and 1.0% from the EU. This would be a positive thing for the Euro.

So, things are not clear for the Euro if the sceptics take the majority which is very possible. Some predict doom for the Euro, but I think that it might even be positive for it, so keep that in mind when trading Euro pairs this week.

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