Where European Populism Will Be Strongest In 2018

While the establishment may breathe a sigh of relief looking back at political developments and events in Europe - which was spared some of the supposedly "worst-case scenarios" including a Marine le Pen presidency, a Merkel loss and a Geert Wilders victory - in 2017, any victory laps will have to be indefinitely postponed because as Goldman writes in its "Top of Mind" peek at 2018, Europe's nationalist and populist tide was just resting, and as Pascal Lamy, the former Chief of Staff to the President of the European Commission admitted earlier this year, "Euroskeptic politicians are largely following the pulse of domestic sentiment. The fact is that the public is less enthusiastic about Europe than it once was."

Echoing the sentiment by the europhile, Goldman's Allison Nathan writes that while the Euro area’s most immediate political risks—i.e., populist or euroskeptic parties winning key elections this year— did not materialize, these movements have continued to gain traction.

  • In the Dutch elections in March, the far-right Party for Freedom performed worse than polls had once predicted, but still increased its share of the vote relative to the 2012 elections. It remains the second-largest party in parliament.
  • In France, concerns about the prospect of Marine Le Pen winning the presidency gave way to optimism over Emmanuel Macron’s reform agenda; nonetheless, Le Pen posted the best-ever showing for her party in a presidential race.
  • In Germany, Chancellor Angela Merkel’s CDU-CSU retained the largest number of seats in the Bundestag, but the far-right Alternative für Deutschland (AfD) entered it for the first time with 13% of the vote.
  • And elsewhere in Europe, populist parties on various parts of the political spectrum performed well enough to participate in government coalitions; indeed, an anti-establishment candidate in the Czech Republic recently became prime minister

Some other observations and lessons from recent European events in the twilight days of 2017:

  • The transition from campaigning to governing has proved difficult. Europe’s increasingly fragmented political landscape has made coalition-building challenging. In the Netherlands, it took over 200 days to form a government with only a single-seat majority. Similarly, German coalition talks with the Green party and the Liberal (FDP) party collapsed in November. But, after having planned to move into the opposition, the SPD—Merkel’s former coalition partner—decided at its congress last week to open talks with the CDU-CSU. Talks were set to begin this week.
  • Other sources of uncertainty remain unresolved. Spain continues to grapple with the standoff between Madrid and Catalonia; regional elections in Catalonia on December 21 will influence the trajectory of the situation. Meanwhile, the UK and EU-27 seem likely to agree to move past the first phase of the Brexit talks (covering separation issues). But in a setback for UK Prime Minister Theresa May, UK lawmakers recently voted for an amendment to the Brexit bill that will guarantee Parliament a vote on the final deal agreed with the EU.
  • The decline in political risk bolstered European assets, though fundamentals likely played a decisive role. The market-friendly outcome of the French elections dovetailed with a pick-up in European growth, supporting European equity markets. US inflows into European equities rose significantly but have since stabilized with the acceleration in growth and the decline in the risk premium likely behind us. Receding political risks also contributed to a stronger euro, which is up 12.5% against the dollar this year. Given the currency move, the SXXP is up roughly 7.5% in local terms and 20.6% in USD terms year-to-date.

Next, here's what Goldman expects and will look for in 2018 and beyond:

  • A continuation of the populist pull. The socioeconomic and cultural factors driving public opinion are unlikely to dissipate. Indeed, they may come into greater focus if growth moderates on a sequential basis starting in mid-2018.
  • Constraints to further fiscal integration. Opposition to fiscal transfers within the Euro area makes incremental revisions to existing EU programs more likely than transformational change. Key to watch will be Macron’s credibility as a champion of integration, which will hinge on his ability to push through reforms in the face of political and economic constraints.
  • Risks around Italian elections set to take place in March. Polls show the largest populist party, the 5 Star Movement (M5S), leading with roughly 27% of the vote. However, the new electoral law and M5S’s unwillingness to join a coalition suggest a centrist coalition is most likely. Such a government, while pro-EU/euro, would likely struggle to implement reforms.
  • An eventual resolution of political issues in Germany and Spain. We believe Germany’s major parties will work to avoid new elections, given limited public appetite for a new vote and the risk of AfD gaining more seats in parliament. In Spain, economic and policy uncertainty could persist, but in our view, it is not likely to have lasting or systemic implications. Eventually, we expect a compromise that grants Catalonia greater autonomy within Spain.
  • A bumpy road to Brexit. Expect the UK and EU to eventually agree to a two-year “status quo” transition plan.

And finally, here is a map showing where the forces of populism are expected to remain strong - and grow - across the continent.

Comments

swmnguy khnum Tue, 12/26/2017 - 21:06 Permalink

"Cassandra" 's comment was pretty clear.  The kids of Muslim immigrants to Germany are overwhelmingly non-religious.  That's easy to understand from the wording, given a certain fluency in English.  Whether it's true or not, I have no idea, but it's not a difficult concept to understand.

In reply to by khnum

ZD1 Cassandra.Hermes Wed, 12/27/2017 - 02:10 Permalink

Germany has seen huge increases in crimes committed by asylum seekers. Cases of murder and manslaughter increased 14 per cent, of rape and sexual assault by 13 per cent and grievous bodily harm by 10 per cent. https://www.ft.com/content/b5a8867e-28ea-11e7-bc4b-5528796fe35c Germany needs 2,000 more judges to deal with ‘enormous’ 5-fold spike in terrorist-related cases. https://www.rt.com/news/414131-germany-terrorist-cases-skyrocket/

In reply to by Cassandra.Hermes

BobEore BarkingCat Tue, 12/26/2017 - 21:55 Permalink

Actually, no...it's an OUTRIGHT REPUDIATION of your somewhat retarded Merikan exceptionalist 'master of the universe' comic book fantasies -since yu don't live near any Muzzies...of ANY generation and therefore don't have any clue about them....whatsover... you indeed would not know that the kids of mr n missus 'first generation' share in common with the rest of the population ///one religion///... of fake-book, app/world smartphone induced consumerism with a dollop of school-induced political correctness and a large measure of self-deception that they are acquiring useable skillls which will gain them employment some time in the future.One happy dysfunctional family o man... under talmudic one world ordure... everywhere!

In reply to by BarkingCat

Maghreb Tue, 12/26/2017 - 20:25 Permalink

I think what Goldman Sachs mean is they intend to stir shit up across Europe and then take bets on the outcome.It is interesting they are not looking at the more troublesome movements forming in Central Europe. There may not be elections but there is a gulf growing in mentality and mindset.From the news you might think Greece had just fallen into the fucking sea and vanished post EU bailout. Suppose we should thank them for the heads up before they get ready to cause chaos.http://www.bbc.com/news/av/world-europe-17108367/how-goldman-sachs-help… 

Scanderbeg Tue, 12/26/2017 - 20:25 Permalink

The problem is these Democratic Socialist governments will always just form coalitions to marginalize the nationalist opposition. However, the populist right is inevitable in Europe precisely because of the mass migration issue and even this much support would be unheard of 10 years ago.In reality the U.S is in far worse shape demographicly than any European nation. They have to go back and they will. It's just a matter of time now.

KekistanisUnite Scanderbeg Tue, 12/26/2017 - 20:36 Permalink

Well there was finally a huge victory this year in Austria with the Austrian People's Party and the Freedom Party forming solid majority coalition government. The Conservative Party there was reformed into a more nationalist and euroskeptic party thanks to Sebastian Kurz. I can see other mainstream center-right parties that have embraced Euro collectivism shifting right over the next several years.

In reply to by Scanderbeg

Ghordius Scanderbeg Wed, 12/27/2017 - 04:00 Permalink

see there: you are opposing "these Democratic Socialist governments" to "the populist right (rising in) Europe because of the mass migration issue"in short, you are making a... projectiona "like the US Dems versus the US Reps"the problem is that in Europe we have nearly dozens of political parties in every and each sovereign country. it's over 100 in totaland no, every and each of those "populist right" parties have their own set of grievances, issues, agenda points and so onsome are against migration, some are against the EU, some are against the EUR but not the EU, some are against both but not migration, some are...Can't Change That: you cannot compare this lightly. you have to go into the details, or risk to be just... the Brits say to that "wanking around"

In reply to by Scanderbeg

Racer Tue, 12/26/2017 - 20:37 Permalink

Governments have become very adept at  manipulating statistics to suit their views. Employment figures is one they have become very adept at! Would you be happy with a zero hours contract that doesn't give you any security about paying your bills AT ALL - but you had to go to a food bank on a regular basis because you were sanctioned and can't get any benefits and you were a beggar not a chooser and took anything to get something to eat? Yay.... you are now in the list of the 'employed' ! Very well done... please die or commit suicide so you won't be a drag on us rich politicians when you get old - we don't want to spend much more money trying to evade paying your lot as we have been doing in the High Court recently - I know we have been getting a discount, but enough is enough, please just top yourselves and save us that surely?

The_Dude Tue, 12/26/2017 - 20:33 Permalink

A little math for you...Caucasians (as loosely defined) were 25% of the world's population coming into the 20th century due to numerous factors.Today, they are approx. 8% and falling.Caucasians due to demographics are skewed toward the elderly, therefore less then 3~4% are child bearing age or will be.Women , as 50% of that population, take it to 1.5~2%.  Half or more of those are infected with liberalism and likely unfit to be good mothers.So we are down to about 0.75~1% of the world's population that can carry Western civilization forward.I'm not giving up hope but people better wake up and start fighting for their survival.

khnum The_Dude Tue, 12/26/2017 - 20:39 Permalink

Our leaders have put us through 2 world wars,dumbed down our kids,eliminated the middle class,dispatched manufacturing jobs overseas,allowed moral and social degredation,out of control welfare,the destruction of the family unit and basically are people with filthy habits and sick minds.You cannot help those who do not wish to be or dont deserve help...Im teeing up an expat job in Asia the west is fucked.

In reply to by The_Dude

swmnguy KekistanisUnite Tue, 12/26/2017 - 21:14 Permalink

Nonsense; it's what happens in late-stage Capitalism.  Wealth is concentrated upward and used to purchase power.  Government becomes an arm of the Corporatocracy. Increasingly it becomes apparent that nobody at all is speaking for the people who have to work for a living.  In fact, it gets to the point where if anyone does speak out for the non-Oligarchs, it's cynically dismissed as being cynical pandering.  Sometime rightly, sometimes wrongly.Once the Oligarchs buy off the government, regulation changes from protecting the public health and safety, to being just another instrument of control.  When the true nature of who has power and what they intend with it, becomes inescapably obvious to a critical mass of people, a crisis is near.  The system may collapse.  Or the Oligarchs will drop all pretenses and impose open Fascism.  Usually that's done with a populist veneer and very slick mass-market appeal.This has been seen numerous times, over and over.  It wasn't new when Julius Caesar did it over 2100 years ago. 

In reply to by KekistanisUnite

BarkingCat Tue, 12/26/2017 - 20:41 Permalink

Well, what I got from this is that two countries are complete morons. UK and Spain. Both have an increase in positive opinion of immigration from outside the EU.

Yen Cross Tue, 12/26/2017 - 21:00 Permalink

     If you adopt all the "stray dogs" there's no way to feed your own family. What countries in South America or Africa  invite new citizens?  NONE!!!   Civilization started when antibiotics were invented.  Think about that

Aengrod Tue, 12/26/2017 - 22:34 Permalink

Everyone in Europe with a brain, hates germany and ze germans. Same cucks and loosers as russkie. Lost wars, killed its own people, kike lovers, mudslimes lovers, screw them.

Joe A Wed, 12/27/2017 - 00:26 Permalink

I agree to the article that the political shift towards the right has been momentarily interrupted. In NL, the government already turned out to be a lying sack of shit that wants to do away with the referendum and limit our freedom, all for our own good of course. In France, everybody is already fed up with Macron.There was much rejoicing when the rise of the right was not so great in Europe but that is just an intermittent point. Countries are just one big terrorist attack away from making the final shift. The ignorance of the ruling elites and the PC crowd in that respect is just amazing. Take Austria, the made that shift and this time around it is already becoming the new normal.

MPJones Wed, 12/27/2017 - 01:58 Permalink

I don't know why these parties are called "populist". They are simply trying to introduce real democracy. They are democratic parties.

deplorableX Wed, 12/27/2017 - 05:58 Permalink

Good discussion although no real insights revealed (by article or comments). Comfort zone predictions which take no note of powerful memes at work. Maybe the status quo will eat them up but maybe, and this is just as possible, the memes will grow stronger, bolstered by the push for genuine democracy.

Dratpmurt Wed, 12/27/2017 - 06:11 Permalink

European populism will be the strongest in the empty minds of trump voting morons that can't even find Europe on the map much less figure out where Nazi's are about to spring up.

Joe Wazzzz Wed, 12/27/2017 - 06:32 Permalink

Pure democracy by referendum is nothing more than a dictatorship by the masses. Unless the voting is made public, people have nothing to lose voting purely their wants and needs which could be as simple as a bottle of whiskey. Putting aside the corruption (specifically bribery) such a system engenders among voters, politicians and the wealthy, it would almost certainly generate nationalist drives everywhere in an effort by the voters to gerrymander their power. As societies become more mulitcultural, democracy becomes more problematic as minority cultures and subcultures will feel more oppressed. Saddam Hussein and Tito come to mind. Lest we are tempted to view America as an example of multicultural success, keep in mind that the American white population has only recently become threatened with minority status and prior to Lyndon Johnson, was 90% white european ancestory. That is to say, within the lifetime of most Americans today.