The European elections are scheduled to take place in late May, and the results could send the currency markets into a tailspin. Many believe that the two main parties that are driving policy making, could lose their majority which would provide the opportunity to form new alliances. With the UK leaving the EU, the election will see fewer seats, and could provide more opportunity for new parties to gain traction.
What are the European elections?
The European elections center around choosing representatives that occupy the European parliament. This is a legislative body, like the US congress. Voting for the European parliament will take place at the end of May from the 23rd to the 26th. Since the UK is planning on exiting the EU, the number of representatives will fall to 705 from 751.
The members of the European parliament are made up of lawmakers from political parties within each member state. Some members will cross party lines and join other alliances with the European Union. Recently, the EU introduced the lead candidate process. This system which began in 2014 allows the lead candidate to take a leadership position. There continues to be a debate on how that will be handled in 2019.
What is Expected?
A clear majority is not expected. This means a split will make it more difficult to implement new European laws. According to the most recent opinion polls, the main stream middle parties will lose their majority as nationalism continues to sweep across Europe. Ahead of the elections these two parties – the conservative EPP and the Socialist S&D, have been driving policy making. Many believe this will end in May, meaning there will need to be new alliances forged.
While most believe that pro-European parties will win most of the seats, a recent report from the European Council on Foreign Affairs revealed that anti-European parties are on course to win a third of the seats. This could undermine the security and defense of Europe, and ultimately create acrimony that could destroy the EU over time. Anti-Euorpean parties are likely going to work in conjunction with those who are looking to undermine European cooperation and push for an end to Russian sanctions.
The European Commission proposes bills, which are then debated and approved by every country’s minister at the European Council meetings. The European Parliament then votes on these proposals, to determine if they will become law.
If enough European discord is created, it could generate significant volatility for the Euro in the forex trading arena. Europe is experiencing negative interest rates, despite positive growth. The last thing the union needs is further discord driven by new elections. Brexit is also a wildcard. While the UK is not expected to vote and add member so the EU parliament, the inability to determine how they will exit and when they will exit has generated volatility for the pound.