European elections: which impacts should investors expect in May?

Watch our analysis in the new series OUR EXPERTS EXPLAINS: #1 European elections, by Camille Neuville, Italy Economist from Global Markets Research

What is the purpose of the European elections?

From May 23 to 26, citizens across European Union Member States will elect 705 MEPs, who will sit in the European Parliament until 2024.
The European Parliament is responsible for law-making in the EU along with the Council of the European Union, and votes on laws based on European Commission proposals.
These laws can cover exclusively European Union-governed areas, such as competition or external trade, as well as areas that are shared with Member States of the European Union, such as consumer protection or the environment.

Just what is at stake in these elections?

In a word – populism. The previous European parliamentary elections attracted little attention, and voter turnout is often low, as many feel these elections are less important than national elections. However, over the past few years, the political landscape has changed in Europe, and we have seen a surge in populist and Eurosceptic parties. This year's elections are crucial as many fear that these parties could win a large number of seats and be in a position to challenge European integration from the inside.

Should investors be worried?

Past European elections have had little impact on the markets, but this time investors are likely to follow events more closely. We should expect populist parties to ramp up their nationalist or even anti-European stance in their campaigns. It will be important to keep a close eye on the international press as this may create uncertainty for investors outside Europe and push sovereign spreads wider. However, we should note that the latest polls and projections indicate that populist parties together would not achieve enough seats to win a majority in the European Parliament.