Dutch elections will test the viability of the populist right in Europe. Fillon tries to stabilize the French center right as Macron gains support from left and center. Federal Reserve likely to raise rates for the first time in 2017. All in The Week Ahead.
Dutch elections will test the viability of the populist right in Europe
This Wednesday, Dutch voters will cast their ballots for the 150-member House of Representatives. Given the low electoral threshold for entry, there are likely to be a number of parties that ultimately end up back in the House. However, the most attention will be paid to the five biggest parties: the Liberals (VVD), Labour (PvdA), Socialists (SP), Freedom Party (PVV), and Christian Democrats (CDA).
For much of this electoral cycle, the PVV stood ahead of the pack, likely to supplant Prime Minister Rutte’s Liberals, and possibly wreak havoc in the months of negotiations that are likely to ensue following the election, as the political parties attempt to forge a workable majority. However, the Geert Wilders’-led PVV has steadily lost support in polling since January, and the Liberals are now slated to emerge with more seats, though the margin is close enough that it is entirely possible that either the PVV or VVD will end up as the top vote-getter. The other political parties also appear to have gained following the decline of the PVV’s electoral position.
Should this trend continue on election day, some combination of the Liberals, Christian Democrats, Labour, and Socialists may be able to forge a workable governing majority and Prime Minister Rutte may end up remaining prime minister. The current cabinet is run by the Liberals and Labour Party in a grand coalition. The election may come down to the last few days, where two major debates between nearly all party leaders occurs on Monday and Tuesday.
Although the months of negotiation ahead may reduce the immediate impact most elections generally have, if the PVV does emerge as the largest party, it would send a strong populist signal. Wilders has campaigned for years on a staunchly anti-Islam platform, and given the political climate in Europe and the debate about immigration and security, a win by Wilders could bolster the position of far-right political parties across Europe, particularly the Front National in France.
Fillon tries to stabilize the French center right as Macron gains support from left and center
On Wednesday, French presidential candidate Francois Fillon will appear before a three-judge panel related to charges that he improperly paid members of his family for official work that they may not have done. Legal experts believe it is likely they will inform him he may be formally charged in the alleged wrongdoing. The Republicains spent last week slowly reconsolidating around its candidate, with former presidential candidate Alain Juppe severely castigating, and then ultimately re-endorsing, Fillon. After rumors that another party member may rise as a potential “in waiting”, none emerged and both the Republicans and the centrist UDI party maintained their allegiance to him.
Meanwhile, independent Emmanuel Macron gained support from elevated figures on the left and right: last Wednesday former Socialist mayor of Paris Bertrand Delanoe, endorsed Macron over Socialist presidential candidate Benoit Hamon, who he viewed as having policies that are too radical to unite the French left. Centrist Francois Bayrou, mayor of Pau, endorsed him a few weeks ago. Thus, Macron appears to have crafted a path to get to the second round of the presidential election, though turnout is difficult to gauge this early.
On the far-right side, Marine le Pen has managed to maintain her standing among her own supporters despite her own legal troubles, though the rise of a new rightist candidate, Francois Asselineau, has the potential to siphon votes away from her, particularly in cities. Though this is unlikely to change her position as one of the top two vote-getters, emerging second from the 1st round could severely limit her chances of ultimately winning the election.
Federal Reserve likely to raise rates for the first time in 2017
This Wednesday, The U.S. Federal Reserve is likely to raise interest rates, with markets expecting the Fed will raise the federal funds rate to 25 basis points to between 0.75% and 1%. This rate increase will be important from a number of perspectives.
First, the remarks from Federal Reserve Chair Janet Yellen will be important in getting an idea of the Fed’s forecast for future rate increases, although previous projections have generally ended up being more optimistic than the final policy decisions. Second, the rise in interest rates could lead to interest rate decisions around the world, particularly if Chair Yellen’s statement indicates a more aggressive Fed reserve in the short and medium term. Third, the response from the White House, which has held a deeply skeptical view of the Federal Reserve and has been adopted by fringes of the right wing in the United States, will likely be indicative of the White House’s formal attitude towards the Federal Reserve. Any statements and moves that appear to indicate a lack of confidence in the Federal Reserve to carry out policies in an objective way could reduce the perceived credibility of the Fed on the conservative end of the American political spectrum.
The Week Ahead provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, The Week Ahead presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
This edition of The Week Ahead was written by GRI Analyst Brian Daigle.