It was the first of three European elections in 2017 that markets have fixated on in the aftermath of Brexit and Donald Trump's US presidential election win as they look for clues about other potential populist shifts across the European continent. The ...
players celebrate winning at the end of the Euro 2016 round of 16
soccer match between England and Iceland, at the Allianz Riviera
stadium in Nice, France, Monday, June 27,
Earlier this week, Prime Minister Mark Rutte's ruling People's
Party for Freedom and Democracy (VVD) won
the most seats in parliament for the third time in a row,
dealing a blow to far-right populist leader Geert Wilders.
It was the first of three European elections in 2017 that markets
have fixated on in the aftermath of Brexit
Donald Trump's US presidential election win as they look for
clues about other potential populist shifts across the European
continent. The other two coming up are the French elections in
April-May and the German ones in September.
Shortly after the Dutch results rolled in, some euro-watchers and
politicians were quick to wonder if the result and Wilders'
slippage in the polls might suggest that other far-right,
populist movements in Europe could be starting to recede as well.
year chart of the euro against the dollar.
The odds of nationalist Marine Le Pen winning in France
significantly dropped, according
to Bloomberg data, and the euro extended earlier gains,
touching a one-month high on Wednesday after exit polls had Rutte
in the lead.
The Dutch prime minister himself even previously
drew a connection between the three elections, saying that
the Dutch election is the "quarter finals to beat the wrong sort
of populism," the French is the semi-final, and the German is the
However, it's important to note that
there are significant differences between the political
systems, electorates, and domestic political, social, and
economic conditions of all these countries — including the US and
the UK — meaning that it is difficult to predict how one election
will turn out based on the results of another country's.
And so, the swings in currency and betting markets are perhaps
more accurately read as reflections of the market's reaction to
events that have occurred (in this case, the Dutch election) than
as a gauge of the likelihood of another event
transpiring in the future (in this case, the French election.)
Echoing Rutte's sports theme, Capital Economics' European
economists Stephen Brown came up with his own metaphor to
illustrate this point (emphasis ours):
"So are the eurosceptics destined for defeat across the
continent? We think that it's too early to write them off. After
all, as the English know so well, there could be an upset. On the
eve of their 2016 European Championship exit to Iceland, the
English were clear favorites. And of course the UK's vote to
leave the EU also confounded the odds.
"Perhaps more relevant is the fact that the rules of the game are
different in the Netherlands. Indeed, the proportional
representation system meant that the PVV's chances of entering
government were always very low. Eurosceptics' chances
are better elsewhere."
For those who may need a refresher on recent events in the world
of soccer, 34th ranked
Iceland unexpectedly defeated
England 2-1 in the Round of 16 back in June 2016 during the
"The electoral results in the Netherlands will have no impact on
the vote in France,"
Mujtaba Rahman, managing director for Europe at Eurasia
Group, said, articulating a similar sentiment. "These
are discrete elections, and the outcomes of these elections are
mainly driven by internal factors, not external ones. I don't
think what happens in the Netherlands is particularly significant
for the dynamic in France, although leaders may say otherwise."
"There is a
big economic and unemployment problem
in France. There
is a security problem that the government has not been able to
get in front of. Add to that the fact that [Le Pen] is
facing a field of candidates who are weak, extreme, corrupt, and
untested and her chance is stronger than it's ever been," he
To be clear, this does not mean that Le Pen will definitely
win come May, nor does it mean that she will definitely lose.
Rather, all that this suggests is that
euro-watchers should analyze domestic variables when
forecasting the likelihood of an election result
in a given country, rather than extrapolating from other
For what it's worth, Brown's team thinks that Le Pen will be
"defeated 'on penalties' in May's presidential run-off," but
"even if she were to win the presidency, the game wouldn't be
over" given the June parliamentary elections. Rahman, meanwhile,
argues that Le Pen's chances are "just shy of 40%," also adding
she would be "constrained" by the parliamentary elections.
Party for Freedom (PVV) leader Geert Wilders gives a speech
during a European far-right leaders meeting to discuss about the
European Union, in Koblenz, Germany, January 21,
Shifting back to the Dutch election, several analysts have
noted that even though Wilder's PVV party was beaten, he has
succeeded in pushing the debate on immigration and integration
"What's telling is that many parties, including Rutte's VVD, have
already taken on some of the PVV's viewpoints and content...
particularly when it comes to immigration policies," Matthijs
Rooduijn, a political sociologist at Utrecht University,
"That doesn't mean that parties like the VVD... suddenly moved to
the far-right, but there certainly is a shift in that direction,"
he said. "Most parties have become more nationalist and that's
because of the PVV's influence."
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