Canadian Investment Review

The results are in: a look at the 2019 EU election

Written by Martha Porado on Monday, June 3rd, 2019 at 8:19 am

Full frame background of European flag blowing in the wind © titonz / 123RF Stock PhotosWhile fringe parties to both the left and right did take several seats away from the centrist parties that comprised the bulk of the European parliament, after last week’s general election, not as many of the far right contingency were elected as some had predicted.

“The key takeaway, from at least market expectations, was that the far right did not gain as much as people had worried about for the most part,” says Marvin Loh, senior macro strategist at State Street Corp. That being said, more left-leaning parties gained seats and the right made gains as well, and the various coalitions that will need to be formed could still take many different forms, he says.

“It’s a function of seeing how these coalitions ultimately come together, that certainly has implications for the tone in terms of being a united Europe . . . or if we push to a more anti-Europe stance.”

The bumpy road to Brexit is one theory as to why the far right, anti-European parties didn’t do as well as many anticipated, he says.

It will be interesting to watch as the new EU parliament settles in, how it will interact with whatever government the U.K. ends up forming, he notes.

Brexit itself could play out in a riskier way than markets had been anticipating, although that isn’t being caused by the shift in power within the European parliament, he adds. “I do think the twists and turns with the conservative party in the U.K. has put a hard Brexit back on the table whereas prior to that it was certainly looking as though they were going to somehow be able to go on an infinite negotiation platform where they just keep going back and trying to put votes together, or possibly cutting a deal,” he says.

Italy is another country markets will want to watch, he says. “In that instance, it has been the League and Five Star [parties] that have continued to show how popular they are amongst the Italians. And they certainly take a harder line with regard to Brussels in terms of trying to have deficits exceed the rules and really pushing hard in being able to increase their ability to stimulate their economy fiscally.”

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