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Europe Faces Critical Election 'Super Cycle' 

Ingo Mainert 


Ingo Mainert


As the Netherlands sorts out its new parliament and Article 50 looms, France and Germany are up next at the polls. Amid volatile politics, Ingo Mainert asks: Will populism and anti-Europe sentiment move the EU away from integration toward dis-integration?
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,” the Netherlands wrapped up parliamentary elections on March 15, French voters will head to the polls on April 23 and May 7,
The PVV's defeat in the Netherlands should pave the way for pro-EU parties, preventing a "Nexit" in Europe
and Germany voters will have their say on September 24. In addition, early elections in Italy are still a possibility.

In the Netherlands, the euro-sceptic Party for Freedom (PVV), led by Geert Wilders, attracted a great deal of attention in the run-up to the country’s March 15 parliamentary elections. Now that the PVV has lost out to Prime Minister Mark Rutte’s center-right VVD party, we expect that the next government coalition will be pro-European Union. This should prevent the Netherlands from leaving the EU anytime soon. However, not only has Mr. Wilders already made his mark on the public debate, but the Dutch system of proportional representation means that undeniably populist issues such as the freedom of movement and the
A Macron win in France would help pro-reform forces in Europe and boost hopes for a new beginning for the EU
future of migration will continue to influence both the domestic political agenda and the debate over the future of Europe.

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
If Germany heads toward a 'red-red-green' coalition of left-leaning democrats and environmentalists, capital markets would need to take a close look
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 analysed 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
Italy is the elephant in the room, with a lack of reforms and serious banking issues presenting critical problems
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.

The material contains the current opinions of the author, which are subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Forecasts and estimates have certain inherent limitations, and are not intended to be relied upon as advice or interpreted as a recommendation.

Allianz Global Investors Distributors LLC, 1633 Broadway, New York, NY 10019-7585,, 1-800-926-4456.


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