Should investors worry about European populism?

The continent of Europe is seeing a wave of populist voting as significant minorities of the electorates give up on the traditional centre-left and centre-right parties.

| 8 min read

Europeans are voting for a more nationalist agenda, demanding stricter controls on borders, fewer migrant arrivals and less tolerance for different cultural and religious views. They may also argue for less tax and regulation on energy and farming, using high energy prices and the cost-of-living squeeze as arguments against faster steps on the road to ‘net zero’.

This usually takes them to a mild Euroscepticism, wanting the European Union (EU) to do less or to bend its policies to their national agendas. The EU has tended to ally with the traditional parties and seeks to keep the populists out of influence but is having to make compromises as more of these parties become part of national governments.

A new European Commission

This is important background to the European elections scheduled for 6-9 June 2024. These elections lead to the choice of a new European Commission (EC) and with it a revised five-year plan for the EU. European politics is still largely based around national parties. At the EU level these parties form into blocs to campaign on a common EU-wide programme.

The centre right campaigns as the European Peoples Party group (EPP), the centre left as the Progressive Alliance of Socialists and Democrats (S&D) , liberals and centrists as Renew (RE), Greens in their generic name, nationalist parties as Identity and Democracy (ID), moderate Eurosceptics as European Conservatives and Reformers (ECR), and the left under their own description.

Current polling shows no grouping or bloc of like-minded groups will get a majority. There will be 720 seats in the new parliament, so it will require 361 for a majority. In the latest generic poll, the centre right EPP is on 171 seats, the Socialists have 142 seats, ID 86 seats, the liberal Renew 86 and the mild Eurosceptic ECR on 86. Combining the nationalist ID and the moderate Eurosceptics produces 172, just ahead of the EPP.

All this implies that the challenger parties will improve their position, but they will stay in a minority. The European Peoples Party will support Ursula von der Leyen staying in post as President of the Commission, but she will need other party blocs to agree to be re-elected. Some in the EU worry that challenger parties may do better than recent polls suggest. ID reached 117 seats in a 2021 poll.

Recent national election results show the volatility and the popularity of nationalist challenger parties.


The most recent illustration is the Portuguese general election. The centre-left governing Socialist party lost a lot of seats. The centre-right Social Democrats only gained two with Chega, the populist party, leaping up to 48 seats. To get to a 116-seat majority in parliament there will need to be either a coalition of the old centre-left and centre-right enemies, or the PSD Social Democrats will need to ally with Chega and move their policy somewhat in a populist direction.


In Italy, in the 2022 election the centre-left governing Democratic party was ejected from office, swept aside by the Brothers of Italy, which picked up 87 seats. Five Star became a former challenger party that had entered government and disappointed. They lost 175 seats. Georgia Meloni as Prime Minister relies on support from Lega, another right-of-centre challenger party, and on Forza Italia, an evolution of the old Christian Democrats that had its populist years on the government stage under Silvio Berlusconi. So far, Georgia Meloni has compromised with the EU to keep the flow of grants and financial support as she struggles to impose better controls on Italy’s exposed maritime borders with the Middle East and Africa.


The Swedish general election of 2022 brought gains for the populist Swedish Democrats, a nationalist party. They now support a government led by the centre-right Moderate party by offering a confidence and supply agreement. This means a minority government can govern with their support which is given should the opposition seek to block the money votes or table a no confidence motion.

The Netherlands

In the Dutch general election late last year, the Party for Freedom, led by the controversial Geert Wilders, won an extra 20 seats to give his party the most seats at 37, where 76 are needed for a majority. The populist Farmers Movement party picked up seven seats based on its opposition to the outgoing government’s ‘net-zero’ policies for agriculture. A total of 15 parties won at least one seat. The new Social Contract party picked up 20 seats.

All four parties in the previous coalition government lost seats. The government was damaged by its farming policies and finally brought down by problems with its asylum and migration policy. It is proving difficult to construct a new coalition government, with several parties unwilling to serve under Geert Wilders, who won the most seats.


The 2023 general election led to the loss of majority for the governing right though the Law and Justice party remained the largest party. The new prime minister is supported by three parties in a coalition and is engaged in disputes with the elected president as he seeks to shift the agenda in a more EU-friendly direction.

What does this mean for Europe’s future?

Generally, EU mainstream parties are finding that if they do as in Germany and create coalitions with their old rivals that may well lead to even fewer votes for one or both of the coalition parties. The electorate sees them becoming too alike and therefore offering no choice or change at the subsequent election. Because most of the continent has variants of proportional representation there does tend to be fragmentation of parties and a fast rate of new challenger party formation as coalition blunts the offering of the traditional parties.

The last century dominance of a Christian Democrat centre right and a Social Democrat centre left has long been broken. The European Parliament itself is elected by versions of proportional representation.

The EU may well agree on Mrs von der Leyen as president and her range of policies to continue.

The combination of mainly national parties, the presence of proportional representation and general voter dissatisfaction with the status quo on inflation, growth, migration and green policies means there is likely to be a further swing to populism, but this will fall short of a majority in the large parliament.

The EU may well agree on Mrs von der Leyen as president and her range of policies to continue, though a strong surge to populism or ambitions from within the wide-ranging coalition of support she needs to continue could disrupt this continuity. The Commission can continue to lead and shape the agenda, owing to the lack of strong European parties with recognised leaders as well known as President Macron or Chancellor Scholz or Prime Minister Meloni.

Meanwhile, as she awaits the judgement of voters Mrs Von der Leyen is adjusting the economic policy to the realities of low growth and a debt-soaked world. She is allowing more flexibility over states’ budgets and raising more debt at EU level to ease financial pressures in Italy, Greece and elsewhere. She is trying to put forward stronger border policies for the common EU border whilst at the same time trying to share the financial burden of more migrants more fairly around Union states.

Ms von der Leyen and the EU’s High Representative (Foreign Minister) will need to adjust EU policy towards the US should Donald Trump be re-elected as President, as he demands the EU countries make a bigger contribution to Nato. The EU has limited military resource and depends on the US-led Nato umbrella. The EU is already calling on member states to do more to boost Europe’s armoury. We expect considerable continuity of EU policy after the election, with the mix continuing to deliver low growth. Inflation and interest rates should come down, which will help.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

Should investors worry about European populism?

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