European Elections 2019: Why are we having them? How could it affect markets?

Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.

Why are we having them?

The European elections are run every five years with the latest round being held this Thursday. These elections decide which 751 Member of the European Parliament, or MEPs, will sit within the European Parliament to represent all 512 million EU citizens. From these members, the UK will elect 73 on the 23rd of May. The role of these members is to approve legislation, budgets as well as new entrants to the bloc.

Now, if we look back six months, the thought of the UK being involved in the latest bout of European elections seemed highly unlikely given Brexit. However, as the UKs exit from the EU has been delayed, and a new date set for October the 31st 2019, the UK must now participate in the polls.

The reason this round of elections is so significant is mainly because it is seen as symbolic, highlighting in the polling booths that Britain has not yet left the EU to the dismay and frustration of many. However, it also means that there are no legal reasons why the government can’t keep on extending the Article 50 period as long as both sides agree. If the UK had not agreed to hold the elections it would have been in breach of its treaty obligations and could have been forced to leave the EU without a deal.

What will the outcomes be?

Turnout in European elections in the UK is historically low, and often the vote is used as a protest to the sitting government. However, Brexit has raised the stakes enormously. Many supporters are furious that the UK has still not left the EU, while many opponents believe there is still a chance it will never happen.

At the last vote in 2014, the United Kingdom Independence Party (UKIP) came top, winning 24 seats. According to opinion polls, this time, the new Brexit Party founded by UKIP’s former leader, Nigel Farage, is leading.

For the remaining EU countries, much like the UK, these votes also act as an unofficial referendum on each member state’s domestic policies. This year, there is expected to be a rise in anti-Eu populist movements, especially within Holland, Hungary, Poland, Italy and France. The result of this is a growing concern amongst pro-EU parties that these Eurosceptics are poised for significant growth within the European Parliament.

What impact could they have on markets & investments?

In the short-run the impact these elections have on markets and investment should be considerably muted. However, looking at the longer-term, if we can expect a Euro-sceptic majority being voted in from the UK, it could cause a lot of noise within the European Parliament, adding to the ambiguity of Brexit negotiations and its eventual outcome. Conversely, were we to see a rise in Pro-Eu parties, we could see smoother negotiations, with some analysts’ voicing the possibility of another public vote on the UK’s membership. Regardless of outcome, these latest elections will have dramatic effects on the overall fabric of the European Union.

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