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Why 95% of Traders Fail

How Trump's Election Victory Will Galvanize Kindred Spirits in Europe

ElectionOracle / European Union Nov 16, 2016 - 12:36 PM GMT

By: STRATFOR

ElectionOracle

Donald Trump's victory in the U.S. presidential election was cause for celebration among Europe's largest anti-establishment political forces. Party leaders from France's National Front, Italy's Five Star Movement and the Netherlands' Party of Freedom offered congratulations to the president-elect, thrilled by his demonstration that the political and media establishment can be thwarted. Like Trump, they hope to ride the wave of anti-establishment fervor building on both sides of the Atlantic to power in 2017, when some of the European Union's biggest economies will hold national elections.


To a great extent, Trump's victory and the success of the United Kingdom's referendum to leave the European Union are the result of the same trend. Emerging political forces in the United States and Europe blame globalization for the loss of jobs and present immigration as a threat to national identity and security. Their message resonates with people who do not see a benefit in free trade or flexible migration and who feel as if traditional parties do not understand their plight. Mainstream media outlets and opinion polls largely underestimated that segment of the electorate in the runup to both the U.S. election and the Brexit referendum. That they failed to foresee Trump's victory or that of the "leave" camp demonstrates the extent to which these emerging social and political trends have been minimized, disregarded or misunderstood.

The same political upheaval could manifest again over the course of Europe's busy 2017 electoral season. In March, the Netherlands — a prominent economic and political power in Northern Europe — will hold general elections. (Italy could join them if constitutional reforms fail in a December referendum, triggering early elections.) France, which boasts the Continent's second-largest economy, will hold presidential votes in April and May, followed by legislative elections in June. Toward the end of the year, the European Union's greatest political and economic force, Germany, will hold general elections in October.

Europe's various anti-establishment parties differ in their agendas, but they share a common criticism of the European Union and the traditional parties that back it. Most want to leave the eurozone and curb immigration. Though they were already performing well in polls before these votes, the results of the June Brexit referendum and Nov. 8 U.S. presidential election confirmed that an anti-globalization agenda could prevail in countries with large and developed economies. Going into the 2017 elections, the U.S. and British examples will add momentum to Europe's anti-system parties, forcing their mainstream adversaries to address the emerging social and political trends that they represent. Many moderate parties will face pressure to include elements from the anti-establishment agenda in their electoral platforms, while others will be tempted to compromise with their rivals. But whether Europe's anti-establishment parties can replicate the unexpected triumphs of Trump or the Brexit in 2017 remains to be seen. 

Different Electoral Systems, Different Results

A few factors should be kept in mind when analyzing Europe's upcoming electoral season. First, the countries holding elections have different electoral systems that produce different outcomes. France, for instance, elects its president in a two-round system. If no candidate reaches 50 percent of the vote in the initial round, a runoff is held between the two candidates who received the most votes. Opinion polls show that the National Front is currently drawing close to 30 percent support, which should be enough to reach the second round of the election. But even if polling companies are underestimating the party's popularity, its leader, Marine Le Pen, still has to persuade a substantial number of voters in order to win office.

By contrast, Germany and the Netherlands use a proportional system, wherein a party's performance in elections dictates its representation in parliament. But this means that, in most cases, a coalition of two or more parties is needed to form a government. Should Euroskeptic parties fail to win enough seats to govern on their own, they will have to find allies to access power. This will prove particularly difficult for Alternative for Germany (AfD), since most other parties in Germany would be reluctant to accept it as a coalition partner. In the Netherlands, the Party of Freedom was in a similar predicament until 2010, when election results were inconclusive. The fragmented parliament that emerged that year prompted the minority government to seek the Party of Freedom's support. The shaky government that the agreement produced lasted only a year and a half, but it broke the taboo of dealing with the Euroskeptic party. Conventional parties in Austria and Finland have accepted Euroskeptic forces as formal government members or as external support in the legislature as well. However unlikely an agreement between German Chancellor Angela Merkel's Christian Democratic Union and AfD seems at this point, some second-ranking members of the ruling party have openly supported the idea.

Things are more complicated in Italy, because the country's new electoral law, which has never been applied, is facing a legal challenge. The statute calls for a two-round system to elect a prime minister, creating a significant opportunity for the Five Star Movement, which enjoys more support among Italy's moderate voters than, for instance, the National Front does in France. In addition, supporters of smaller parties, such as the anti-immigration Northern League or former Prime Minister Silvio Berlusconi's center-right Forza Italia could help the Five Star Movement defeat the ruling Democratic Party in a runoff. That said, if early elections are held, the Italian parliament could choose to follow the old electoral law or attempt to amend the new law to lessen the odds of a Five Star Movement victory.

All Eyes on Trump

A second factor to consider will be Trump's performance after he takes office. By the time the electoral cycle begins in Europe in mid-March, the new U.S. administration will have been in power for just under two months, giving Continental voters a glimpse of what an anti-globalization administration looks like. Of course, the differences in political systems will make for an imperfect comparison, but nevertheless, support for like-minded parties in Europe could intensify or weaken, depending on how the new president fares after his inauguration.

An orderly transition in the United States and a successful start to Trump's term would quiet fears among European voters about supporting an anti-establishment candidate. Similarly, Brexit has offered a reassuring example, proving that the British and European economies are more robust in the face of political turmoil than some expected. The Brexit's most profound effects, however, will not become evident for several years — a boon for political parties in Europe that want to organize similar referendums.

The Trouble With Being in Power

Finally, the track record of anti-establishment parties that have already achieved power will influence their popularity elsewhere in Europe. Such parties generally poll best as part of the opposition, and those that have attained political prominence have had trouble maintaining it. In Finland, the popularity of the Finns party sank after it joined the governing coalition and was forced to compromise on measures that contradicted its manifesto, for example by accepting spending cuts or agreeing to Greece's third bailout program. Likewise, even if she won the office, the limitations of the French presidency would prevent Le Pen from carrying out the National Front's agenda wholesale. Governing the city of Rome is proving similarly difficult for the Five Star Movement. In just under five months, its stint in charge of the Italian capital has exposed the party's internal divisions and revealed the managerial shortcomings of some of its members.

Though governments led by anti-establishment parties would face similar constraints as those led by their mainstream rivals, a victory by any of these upstart groups would have national and international repercussions that a victory by a traditional force would not. If the Five Star Movement wins power in Italy, for instance, its triumph could have immediate consequences in the eurozone. At a time when Italian banks are fragile and questions over the future of the country's cumbersome public debt remain unanswered, the Italian economic and financial environment may deteriorate more quickly under the Five Star Movement's rule than it would under a mainstream party. A win for the National Front in France, meanwhile, would probably force Germany to accelerate negotiations with Paris to reform the European Union.

Trump's victory and the Brexit referendum have revealed the extent to which anti-globalization forces are gaining ground. Anti-establishment sentiments will likely be on display throughout Europe's impending electoral season and will influence political developments on the Continent even if the parties that espouse them fail to reach power. Win or lose, these parties will continue to challenge the free movement of people, goods, services and capital in the European Union and throw the future of the eurozone into doubt. Though an electoral victory would speed up those processes for Euroskeptic parties, their influence will still be felt on the Continent long after the 2017 votes have been tallied.

"How Trump's Victory Will Galvanize Kindred Spirits in Europe is republished with permission of Stratfor."

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Disclaimer: The above is a matter of opinion provided for general information purposes only. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis.

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