By Oren Laurent
President, Banc De Binary
Never before has the European Parliament comprised of so many eurosceptics. As 28 EU nations went to the polls last week, the uncertainty and paradox created by the election became apparent, with loses in seats for the mainstream parties reflected by loses in the financial markets. Where does this leave Europe and what are the implications of the vote?
On Friday, the Euro dropped against several of its major peers and closed at a three month low against the US dollar, at just $1.3616, a sad indicator of market sentiment in the middle of voting for the European Parliament. The decline was also the result of data indicating poor manufacturing activity across the Eurozone and low business confidence in Germany, released on Thursday and Friday respectively. These add further weight to the suggestion that the European Central Bank may boost stimulus as early as next month, and also help to explain why European voters are disillusioned.
The world’s second largest democratic process, with 400 mln eligible voters, gave Europeans the chance to express their frustrations at the sluggish pace of economic recovery. In the results announced on Sunday night, it was clear, as predicted, that a sizable number of the 43% turnout voted for the parties that spoke most strongly of change. Ironically, these tend to be the hard-liner parties, on the fringe of mainstream politics and opposed to current European political and economic infrastructures.
Italy’s Northern League spent fortunes ahead of the election covering the country with yellow banners that read “Basta Euro” “enough of the Euro”. In France, Marine Le Pen, argued outside of the National Front headquarters, that the EU “can’t be improved. We need to let it crumble and build after it a Europe of free and sovereign nations.” The far-right UK Independence Party also puts euroscepticism and a fierce anti-immigration stance at the heart of its ideology. Its leader, Nigel Farage, boasted that the party’s successes last week will now force current Prime Minister, David Cameron, to become more anti-Europe to retain his right wing voters in the UK’s general elections next year.
These protest parties may be more powerful than previously, but are still in the minority. Despite the fact that they all focus on national issues and share no common policies except their desire to disband the Union, they will have to club together in the Parliament in Strasbourg if they want to make their cries against integration and free trade heard. They could certainly destabilise the union and stall its activities. In particular jeopardy is the ongoing attempt to create a trans-Atlantic free trade agreement between the EU and the US which was designed to spur economic growth.
The results of the vote question the public’s perception of the euro and austerity measures. The united voices of the nationalist parties could threaten current European policies and efforts to restore growth, and could potentially worsen pro-European sentiment. Time will reveal the true effects of the votes and the degree of power that the parties exert. Paradoxically, the protest parties will lose credibility if their bark is worse than their bite and they don’t improve the lives of voters, but at the same time, but if economic growth continues, however slowly, perhaps by the next election, they will have lost their very appeal.
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