PGIM: European elections: a real “year of change”
The European elections they may not be the first appointment that comes to mind in the crowded calendar of democratic exercises of 2024, the year in which approximately 50% of the world population goes to the polls. However, with an electorate of 359 million people that they will choose 720 deputies for a five-year mandate, the elections for the next European Parliament present the widest scope of any elections this year in the world. It is expected that the turnover will be significant: over 50% of the members of Parliament are expected to change. At the same time, the vote anticipates a broader reshuffle of the EU leadership: a real “year of change” that will determine the future direction of travel of the world’s third largest economy. EU leaders and the newly elected Parliament will decide who they want to lead the European Commission, the EU’s executive body; the current president Ursula von der Leyen is the favorite but there is no certainty of a second mandate.
Meanwhile, MEPs will vet future national commissioners and judge their suitability to lead different policy areas, while a new president of the European Council needs to be found who can chair summits of European prime ministers and presidents. This means that instead of a fiery electoral moment followed by a cooling-off process, Brussels will go through a prolonged period of office struggles, for the conquest of ownership in programs and political bargaining. At the center of all this is Ursula von der Leyen, former German Defense Minister, who rose to international prominence when she appeared as a surprise choice for the presidency of the Commission in 2019: her name has emerged several days ago (and nights) of intractable summit negotiations between EU leaders. In 2019, Von der Leyen narrowly managed to be confirmed by Parliament by 9 votes – demonstrating political adaptability with the support of a strong EU green agenda while winning critical votes from a nationalist right skeptical of great ambitions of the EU. Given the expected composition of the new Parliament, it may have to learn to make some even more notable political bends and twists. If current polls are reliablewe should expect a considerable shift to the right. Right-wing and anti-establishment parties could come first in eight or nine EU member states and second in as many.
If the Marine Le Pen’s Rassemblement National (RN). won the 2019 European elections by a small margin, he is expected to beat French President Macron’s centrist Renaissance by a much larger margin in 2024. Polls predict 27 seats for RN and allies against 17 for Macron’s candidates. In Germany, Chancellor Olaf Scholz’s Social Democrats could come in fourth place behind the anti-European and anti-immigration party Alternatives für Deutschland (AfD). Although the centre-right Christian Democrats (CDU) lead in polls in Germany, they have moved significantly to the right to avoid a hemorrhage of votes, a trend seen across much of Europe. The achievements of “anti-elite” right-wing leaders and parties – Geert Wilders’ Party for Freedom (PVV) in the Netherlands, the CHEGA! André Ventura in Portugal, Tom Van Grieken’s Vlaams Belang in Belgium – are becoming a new normal across the continent. And centre-right parties are moving much more towards these anti-establishment positions.
FIVE YEAR OUTLOOK: A SHARP RIGHT TURN IN EU POLITICS?
Maybe not. The three major political families: the European People’s Party (EPP) centre-right, the centre-left Socialists and Democrats (S&D) and the centrist/liberals of Renew Europe will most likely maintain a slim majority. They will rely on it to make big decisions in a grand coalition, such as delivery to Von der Leyen holds the keys to the Commission for another five years and adopt the EU’s next long-term fiscal framework. If a much stronger emphasis on economic growth and competitiveness is more evident, a complete turnaround is not expected on the Green Deal. Despite their growing numbers, Le Pen’s followers and other far-right figures are unlikely to participate in major decisions in Brussels. But when it comes to making minor and ordinary regulatory decisions in the European Parliament, such as the imposition of stricter regulations for the restoration of natural ecosystems across Europe, there will be a large center-right group that the EPP can count on for votes when it suits them. The political lines of the socialists and the greens could find each other out of the decision-making process to a much greater extent in the next Parliament.
While the green agenda does not disappear, a serious softening is expected, especially in the presence of a compromise between growth and green. In addition to the green agenda and competitiveness, security and defense are emerging as the third key point of the political agenda of Brussels. This involves both strengthening Europe’s defense capabilities through industrial policy, as well as increased economic security measures – trade protection instruments, possible restrictions on incoming and outgoing investments, location requirements. Which it will inevitably have an impact on the opening of Europe to investments and non-EU businesses. A nativist agenda could clash with the competitiveness agenda, which may require greater non-European investment and dependence on other global jurisdictions such as the United States and China. One thing is certain: the next five years promise to be complex and turbulent, as the EU navigates the acute global challenges of our time in a fragmented political landscape. In 2019, von der Leyen promised a “geopolitical commission”; in the next five years, Europe will explore the frontiers of a geopolitical EU.
Article by Taggart Davis, vice president, Government Affairs EMEA at PGIM*
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