Populism-nationalism in France and the broader Eurozone - BBH

According to Marc Chandler, Global Head of Currency Strategy at BBH, the rise of anti-EU and anti-immigration parties in Europe, the UK referendum to leave the EU, and the election of Donald Trump as the 45th US President are widely thought as evidence of a populist-nationalist wave sweeping over the world. 

Key Quotes

“It is seen as an anti-establishment push in the wake of the financial crisis.”

“The Dutch turned back their populist challenge, though the Freedom Party increased the number of parliament seats it has and, in the fragmented system, is the second largest.  Even though Prime Minister Rutte’s PVA came in first, it still lost seats, and its coalition partners, especially Labor, were soundly trounced.”

“Even in the US, Trump’s fiscal plans for the remainder of the year show little evidence of populism (except some funds earmarked for the wall on the Mexican border).”

“The populist-nationalist victories in the US and UK seem peculiar to their two-party systems. In both cases, the populist-nationalist party did not win.  What happened was that the center-right party adopted at least part of the populist-nationalist agenda.  This will be more difficult in the multiparty political systems in Europe, where the center-right parties ran against the nation-populists.  There is a political tradition of the main two parties cooperating to improve the chances of defeating the National Front.”

“In France, the National Front’s Marine Le Pen continues to hold on to first place in the polls.  A scandal over hiring family members has weakened the center-right's candidate Fillon.  The former Socialist Macron has moved into second place.  Either of the two would beat Le Pen in the second round.  Parliamentary elections are in June, allowing a new government to form in Q3.”

“The defeat of populism-nationalism in the polls does not mean that issues that it raises have gone away or been resolved.  National identities have become more salient.  There are many forces at work: immigration, the financial crisis, and changing economic competitiveness.  The disparity of wealth and income have increased. An increasing number of young people in high income countries are unlikely to live as well as their parents.  Debt levels (public and private) continue to rise, and this can also be seen as a generational wealth transfer.  Class mobility has become more rigid.”

“The national elites have an opportunity to respond to the challenge, but it may be like Draghi calling for structural reforms:  a good idea but poor execution.  We have found many investors and observers can follow us on this year’s elections outcomes in Europe.  However, many think that next year’s Italian election is where the real challenge lies.  It is not clear how badly split the center-left PD party is, or whether Five-Star Movement’s difficulty in governing Rome will weaken it in the national contest.”