The transatlantic influences on governments

President Biden shaped the pace and nature of the response of the allies to the invasion of Ukraine and promoted the UK/EU Windsor Framework for Northern Ireland. He was keen for Europe to take the Chinese threat more seriously and to reduce their dependence on Chinese technology. He withdrew from Afghanistan without warning which meant allies also had to leave in a hurry.

There will be just as much or more guidance as President Trump takes up office.

Elon Musk is making public a wide range of views on UK and German politics.

He is prepared to advise, criticise and intervene in the politics of an overseas country in an unusual way for someone related to a US Administration. Mr Musk has backed the Reform party in the UK whilst telling it to change leaders and has offered supportive statements to the AFD parry as we get close to the German election. It is true that President Trump has not yet assumed office, and true that Mr Musk is not about to take a Cabinet post binding him to full collective responsibility. It is causing considerable concern amongst the governing parties of Europe. They expect private advice and public silence over their own political problems from their US ally.

The EU is currently considering whether it can take legal action against X and Mr Musk over his offer of airtime to Alice Weidel, the AFD leader and or over algorithms his site uses which some say give too much advantage to the challenger parties which the EU establishment wishes to keep out of power. Meanwhile the EU Commission President is working from home recovering from pneumonia and has cancelled the opening informal Council of Ministers under the new Polish Presidency of the Union. The EU states are under pressure from the Trump team to increase spending on defence and to take more responsibility for supporting Ukraine. This comes against a background of low growth and stretched budgets.

The progress of challenger parties

As we expected most of the governments that presided over extensive covid lockdowns followed by a nasty inflation are being swept away. Voters looking back are not impressed and are unhappy about the cost of living and the lack of growth. The Canadian Prime Minister and Finance Minister have recently resigned, with the ruling party way down in the opinion polls. The French and German governments have been voted out of office with Germany about to go to the polls. France is in stalemate after an early election with the President’s party unpopular. Agreeing any budget with a three way split in Parliament is proving difficult. The UK government was swept aside. Even in the USA where the economy had delivered more growth, the cost of living and other issues led to a major defeat of the Democrats.

In the EU this century there have been waves of populist parties capturing support and sometimes getting into office. The post war pattern of most countries having a Christian Democrat/Conservative/Republican centre right party alternating in government with a Social Democrat/Labour/Workers party has broken down. Challenger parties have come from both right and left, with National Rally in France countered by a left-wing alliance led by France Insoumise, left of centre 5 Star in Italy outpaced by the Brothers of Italy and Lega on the right, the AFD in Germany on the right opposed by BSW on the left. Reform in the UK combines the traditional right wing wish to control migration with policies more associated with the left including proportional representation and some water nationalisation. BSW in Germany includes tough rhetoric against migration alongside its more left wing economic and social policies.

They all benefit from one overriding feature of public opinion. There is widespread dissatisfaction with what the establishment or older parties have delivered . Some voters think they are merely incompetent and want to vote in a new government that will shake the system up and get it to deliver for them. Some think there is a conspiracy between the established parties, who promise one thing to get elected and then pursue an internationally agreed set of policies, often laid down in Treaties, which an important part of the electorate do not like.

What do the challenger parties propose?

Many of the parties are sceptical about climate change, or campaign against particular policies that governments impose in pursuit of decarbonisation. President Trump campaigned strongly against the international agreements on net zerro, proposing more oil and gas be extracted and used. Reform in the UK is against the carbon reduction agenda. The Farmers party and the Freedom party which gained many seats and votes in the Netherlands did so by opposing policies like the wish to greatly reduce animal husbandry to cut emissions. As the road to net zero gets more difficult, requiring substantial changes of behaviour by voters over their own heating, personal transport, holidays and diets so the challenger parties will have a bigger well of dissent to draw from.

The parties often oppose austerity policies, seeking to unite protesters against spending cuts and tax rises. In France the right and left united to prevent a budget designed to bring the deficit down, and toppled the government over the issue. A challenger party does not have to have a coherent set of policies based on a particular world view or philosophy, so they will often adopt a campaign because they see it meets a need and is popular. This produces left/right hybrids. In the USA populism has emerged from within one of the two dominant parties, with Mr Trump building a bigger Republican base out of campaigns that can involve tariffs and government interventions that traditional Republicans would not have advocated. He has adopted the key common policy of the challengers in general, strict migration control. Mr Trump’s populism will take inflation seriously but will regard cutting taxes as more important than further strides to cut the large debt and deficit. He will judge himself by how successful he is at boosting growth and the stock market. In Europe challenger parties of the left define austerity as too little public spending and want to spend more, whilst parties of the right tend to define austerity as low or slow growing living standards for all and seek tax cuts.

What happens next?

The headwinds from the new US Administration will help spread the fires of European populism with or without more provocative Musk statements on X. EU governments that want to survive will be pushed into tightening border controls and reducing the flow of migrants. Some of this will be done at EU level, but the Schengen agreement on open borders between most member states will remain under stress with individual states partially suspending it.

The EU and the German government are both being prodded into a more relaxed approach to debt and deficits. The EU is investigating the persistent French breaking of the debt and deficit rules, but it is difficult to see them imposing a large fine and getting tougher over remedial action when the French Parliament cannot bring itself to control the debts.

Where elections take place challenger parties will win more seats and gradually gain more positions within coalitions. In Germany the AFD will probably leap to second place, but the CDU/CSU with more seats will strive to form a coalition with anyone but the AFD which will not be easy. Challenger parties lead the coalition government in Italy, have strong influence in the Netherlands, and are ahead in the polls for the more distant 2027 French Presidential election.