Global

Will the EU disintegrate in 2017?


Published

A number of commentators have suggested that the European Union is in imminent danger of collapse or disintegration. We are likely to know if this is the case during the course of 2017, with important elections and the start of Brexit negotiations.

We start with the triggering of Article 50 by the United Kingdom by the end of March. Once negotiations begin the people of Europe will be watching closely. If the EU negotiators are intransigent and arrogant in much the way that they are perceived to be at present then this could well strengthen the hand of Eurosceptic parties across Europe.

Many European voters noted the way in which the then British Prime Minister David Cameron was treated with disdain when he tried to negotiate minor changes in a bid to stave off disaster in the European Referendum. Many more have noted the petulant and almost childlike way in which many of their leaders have reacted to the decision by ordinary British voters in June. Although some have delighted in the way in which the arrogant British are being ‘taught a lesson,’ many others note that what holds true for the British also reflects the way in which the European Commission, in particular, is likely to treat their own country in the future.

But if the EU negotiators give away too much and make it easy for the UK then it could embolden other countries to consider leaving the EU. The key players in the European Commission have displayed so little regard for democracy that it seems unlikely that they will be able to get the balance right.

Even before those negotiations start the Dutch will hold a general election on 15th March. The hard Eurosceptic and far-right Party for Freedom (PVV) led by Geert Wilders is ahead in the latest opinion polls with a projected 36 (+21) of the 150 seats in the House of Representatives.

Prime Minister Mark Rutte’s centre-right People’s Party for Freedom and Democracy (VVD) is on 23 seats, a substantial drop on their current 41 seats and the centre-left Labour Party (PvdA) is projected to drop 28 seats to win just 10 seats. The PVV could easily force a referendum on EU membership and opinion polls suggest that the leavers could well win.

Finland holds local elections on 9th April but there is little suggestion that the Eurosceptic Finns Party (PS) will do well. Nevertheless the elections will create another stress point for the hard pressed EU.

On 23rd April the first round of the French presidential election will take place with a second round almost inevitable on 7th May. The deeply unpopular President François Hollande of the centre-left Socialist Party (PS) has said he won’t stand but he has probably sealed the fate of his party’s candidate with the party polling about six percent support. An interesting outsider is Emmanuel Macron with his new centrist party, En Marche! And he is currently on 19% support.

But the real battle looks to be between the self-styled Thatcherite François Fillon of the centre-right The Republicans (LR) on 29% and the hard Eurosceptic and far-right National Front candidate Marine Le Pen who is on 26% support. If Le Pen wins then expect an early referendum on EU membership. But the historic numbers suggest that she won’t make it to the final post.

In the 2012 presidential election Le Pen came third with 6.4 million votes. In the March 2015 department elections the FN came third with 5.1 million votes in the first round but dropped back in the second round. In the regional elections in December 2015 they took 6.8 million votes in the second round but failed to win a single region. Every time the FN has looked threatening the centre-left and centre-right have loosely cooperated to block the ambitions of the FN. In a presidential election, based on the last result, Marine Le Pen would need around 18 million votes to win; the FN has never exceeded seven million votes. That is not to be complacent, but the figures certainly don’t look encouraging for the Eurosceptic National Front.

Having suggested that Marine Le Pen can’t make a breakthrough, the Pew Research Center polling after the Brexit vote put France as more Eurosceptic than the British. The polling suggested that 61% of French people viewed the EU unfavourably. France was only surpassed by the Greeks on 71%, whilst there were more Spanish voters (49%) who viewed the EU unfavourably than favourably (47%). Neither Greece nor Spain are due elections for several years, although in Spain the centre-right People’s Party (PP) just about hangs on in a minority government.

On 4th May the United Kingdom holds local elections which could well indicate how British voters feel about progress on Brexit. If the pro-European opposition Labour Party do badly in the local elections then expect further attempts to unseat their leader Jeremy Corbyn. A good result for the ruling Conservatives will embolden Prime Minister Theresa May but she is unlikely to call a snap general election (which some are predicting) unless she experiences troubles over Brexit within her own party ranks.

By 22nd October Germany should have held its general election. But before that there are three important state elections coming up; the Saarland state election on 26th March, Schleswig-Holstein state election on 7th May and North Rhine-Westphalia state election on 14th May. Over the last couple of years the strongly Eurosceptic and right-wing Alternative for Germany (AfD) has increased its representation at state level, taking seats in three states in 2014, another two states in 2015 and five states in 2016. Their best result was in the eastern state of Saxony-Anhalt where they took 24.4% of the vote. But that does look to have been their high tide.

In the latest opinion polls for the federal election Angela Merkel’s centre-right Christian Democratic Union of Germany and Christian Social Union in Bavaria (CDU/CSU) are on 35% support, although the long term graph shows a gentle decline. The traditional opposition Social Democratic Party of Germany (SPD) seem stable on about 22% support and the AfD are on 13% support. Nevertheless that will give the AfD representation in the Bundestag for the first time and a clear voice of Eurosceptic dissent in Germany’s federal parliament.

The other worry for 2017 is Italy. Following the recent defeat in the constitutional referendum and the resignation of Prime Minister Matteo Renzi it looked bad for the pro-Europeans. Following changes to the electoral law known as Italicum the largest party in the lower house or Chamber of Deputies would gain additional seats to give them a majority. The first job of the new Prime Minister, Paolo Gentiloni, is to unravel that electoral law and return the elections back to a proportional representation process.

Gentiloni has the Eurosceptic Five Star Movement (M5S) led by Beppe Grillo screaming for an early election, but the rapid formation of a new Cabinet has calmed things down. The Italian banks still have the capacity to throw the economy in turmoil but the political crisis is over, at least for now with parliament agreeing to a banks bailout. The M5S will continue to press for early elections because currently they are close behind the ruling Democratic Party (PD) in the opinion polls. The PD is on 31.1%, the M5S are on 29.2% with the centre-right Forza Italia (FI) on 11.2% and the Eurosceptic and right-wing Northern League (Lega Nord – LN) is on 13.7% support.

The Italian general election has to be held on or by 23rd May 2018. The electoral legislation could be passed early this year but Italian MPs won’t be eligible for their state pension before September. So, no doubt Paolo Gentiloni, will want to delay the election as long as possible. Forza Italia will want the election to be held on the new electoral law which will return it to the old system and might prevent them from imploding.

Even with all of these reasons for potential delays could the M5S win a general election? Again the numbers would suggest not. In the 2013 general election the M5S managed 25.56% of the vote whilst in the 2016 locals they did very well and won 20.16% of the vote and a number of mayoralties. Unfortunately for them the victories in the local elections included the ungovernable city of Rome. Their new Mayor, Virginia Raggi, has had a torrid few months. A political novice, she has made a mess of the early stages of her administration with claims of corruption and five key public servants handing in their resignations. This has given the establishment parties ammunition to fire back at Beppe Grillo and his insurgents. It seems that they are no better than the other parties after all their crowing about corruption and incompetence. Given another year and the M5S may well have seen the tide of enthusiasm for their style of government recede.

So, is the EU in imminent danger of collapse? Probably not from elections this year, although none of the established parties can afford to be complacent about the Eurosceptic insurgents. The chances of another country agitating to leave the EU are quite high but the implosion, if it comes is more likely to occur from economic events involving the Eurozone rather than a major electoral upset.

More detailed briefing on the politics and risk of doing business in this country is available to clients and subscribers. If you would like to know more then please contact enquiries@tradebridgeconsultants.com