Deema

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The threat of an imminent European Union (EU) crisis dimmed in the spring after a pair of high-profile Euroskeptics were defeated swiftly in national elections. Geert Wilders of the Netherlands and Marine Le Pen of France had their sights set on exiting the EU and abandoning the euro. Although their plans have been thwarted, we likely haven’t seen the end of the “exit” bandwagon.

EU Awaits German Election

For starters, Germany is also headed for federal elections this year. Though currently not expected to win, the far-right Alternative for Germany (AfD) party could make significant inroads like it already has at the regional level.[1] Like in France, where Le Pen will form a major opposition to Emmanuel Macron’s government, AfD could use the upcoming vote as a springboard to greater influence.

EU Awaits Italian Election

Meanwhile, Italians are scheduled to vote in a new round of elections next year. Unlike other southern European polities, Italy has a strong anti-EU voice in the Five Star Movement, which received a vote of confidence after Prime Minister Matteo Renzi failed to pass constitutional reforms last December. By stepping down, Renzi has opened the door wide open to Five Star.

The anti-establishment populist party seeks a “sovereignist” agency, which could mean pulling out of the North Atlantic Treaty Organization (NATO), the EU and euro. It could also mean boycotting free trade deals like the Transatlantic Trade and Investment Partnership (TTIP) and the Comprehensive Trade Agreement (CETA) between Canada and the EU.[2]

EU Awaits Brexit Talks

Let’s also not forget the trade talks between the United Kingdom and Brussels which began on Monday the 19th of June. Prime Minister Theresa May failed to secure a majority in the 8 June election, which exposes her and her party to severe backlash in parliament and in the public eye.

Nevertheless, the Conservatives are forging ahead with Brexit. The outcome of the negotiations, which are expected to last at least two years, could dictate future appetite for leaving the Single Market. A complex exit that leaves the UK worse off than it was before could deflate the growing populist zeal that’s spreading across the continent.

Is the EU Crisis Over?

The financial markets are highly sensitive to any mention of an EU “exit” crisis. Although the momentum appears to have died off following the French and Dutch elections, populism is still spreading fast. This means it is possible that we haven’t heard the last of the EU crisis of legitimacy.

 

 

[1] Russia Today (4 September 2016). “Right-wing AfD beats Merkel party in regional elections – exit polls.”

[2] Alvise Armellini (19 April 2017). “Italy’s Five Star Movement presents ‘sovereignist’ agenda.” EU Observer.

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