Europe Faces Critical Election ‘Super Cycle’

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As the Brexit drama plays out in the UK, 2017 is shaping up to be an election year like no other for the rest of Europe. In this “super cycle”, voters will head to the polls in three regions on four critical dates: in the Netherlands on 15 March, in France on 23 April and 7 May, and in Germany on 24 September. In addition, early elections in Italy are still a possibility.

In the Netherlands, the euro-sceptic Party for Freedom (PVV), led by Geert Wilders, has been attracting a great deal of attention. Yet even if the PVV receives the most votes – which seems unlikely, given the latest surveys – it does not appear that Mr. Wilders or his party will enjoy much responsibility in the new government. Instead, there will probably be a multi-party coalition of four or even five parties led by Prime Minister Mark Rutte. So is this much ado about nothing? The answer is yes – and no. Whatever happens in the Netherlands, it still sits near the front of the overall trend toward populism and anti-Europe sentiment.

The presidential election in France is also becoming an increasingly important and intense affair. At the time of this writing, there are three leading candidates, with the far-right Marine Le Pen gaining ground on the centre-right Francois Fillon, but with the social liberal Emmanuel Macron holding on to his favoured status. While a victory by Ms. Le Pen in the first round is possible, Mr. Macron currently appears to have the best chances in the final ballot. This would be a clear victory for pro-reform forces in Europe, and a chance for a new beginning for the European Union.

In Germany, the mood is shifting quickly at the expense of Chancellor Angela Merkel. The new candidate of the socialists – Martin Schulz, the former president of the European Parliament – has got off to a brilliant start since his nomination. He and his Social Democrats have pulled close to Mrs. Merkel’s Christian Democrats, though the sustainability of his momentum remains to be seen. It is possible that Germany could eventually see a “red-red-green” coalition of left-leaning democrats and environmentalists – a development that would need to be more strongly analyzed by the capital markets in the coming months. Another interesting twist would be victories by Mr. Schulz in Germany and Mr. Macron in France, as this would increase the potential for a stronger political union for Europe.

Finally, new elections in Italy are possible, yet this is the elephant in the room that few are talking about. Italy has made little to no progress on reforms, and it still suffers from serious unresolved banking issues – both critical problems that could dampen some of the enthusiasm of pro-Europe advocates.

Clearly, Europe is at a crossroads, and muddling through is no longer an option. After these elections have wrapped up, Europe will need a new vision to carry it forward, but right now it is facing a Shakespearean moment: To be, or not to be? That is indeed the question.

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