Following the 2016 British referendum on remaining in the European Union and the US Presidential Elections, the western rise of populist nationalism turned its head to a series of European elections in the Netherlands, France, and Germany.
The potency of this political movement seems to be on the wane in 2017. The first signs came with the faltering of Geert Wilders of the Party for Freedom to the conservative Prime Minister Mark Rutte in the Dutch election of 15 March. In France, the Nationalist Front’s Marie le Pen is now running within the margin of error with Emmanuel Macron prior to the first round of voting at the end of April. A hypothetical head-to-head matchup of the two shows Macron taking over 60% of the vote, once again revealing trouble for the growth of the European populist nationalist movement.
Populist nationalism in Germany
As with its neighbors, the September national elections in Germany may be yet another step in stemming the tide of European nationalist populism. Germany’s far right Alternative for Deutschland (AfD) party grew in prominence and appeal following the 2015 Syrian refugee crisis, becoming Germany’s third largest party by 2016. It holds a policy platform that includes ending “irregular migration”, a commitment to “traditional family models”, opposition to multiculturalism, and leaving the European Monetary Union.
Since the AfD reached its high water mark in 2016, however, it has faced a series of setbacks that have begun to erode their popular support. Chancellor Merkel has endorsed a ban on burqas where legally permissible, allowing her conservative Christian Democratic Union (CDU) party to shift right and rob the AfD of a key policy issue. Depriving the AfD of another key rallying cry, the number of Syrian migrants claiming refugee status has fallen considerably and the issue has receded from prominence in German news outlets. Additionally, the previous month has seen a rise in public support for the Social Democratic Party (SPD) under Martin Schulz. With a background as the President of the European Parliament, Mr. Schulz has portrayed himself as the German ‘everyman’, and the rise of his popularity has come at significant expense to the AfD.
These shifting dynamics are captured in recent polling presented in the German newspaper Bild am Sonntag, revealing 32% popular support for the SPD, up 12% in the month since Schulz became SPD Chairman in mid-March. Following closely behind was the CDU, with 31%, leaving the AfD trailing well behind at 11.5%, a weak showing for the populist nationalist AfD following a year of strong gains in popular opinion. The poll also seems to demonstrate a strong endorsement for the ‘Grand Coalition’, the governing coalition of the CDU, their Bavarian counterpart, the CSU, and the SPD currently forming a governing majority in Berlin.
The AfD also suffered a significant electoral setback in last week’s elections in the German state of Saarland. The election received international interest as an early signal of the prominence of the AfD in actual voter turnout prior to the September national elections. With a high voter turnout of 70%, the CDU faired very well, receiving 40.7% of the vote, a rise of 5.5% over the previous state election. The AfD, conversely, received the fourth highest vote sum by party with only 6.2% of the vote. The early, successful outcome for the CDU has served to calm a tense mood within its alliance of Christian, center-right parties. While the AfD’s performance may be linked to the local party apparatus that was nearly disbanded in October of 2016, the weaker than anticipated outcome still bodes poorly for the party’s ability to maintain public enthusiasm.
Electoral scenarios
While early polling and electoral signs seem to indicate that, as in the Netherlands and France, the popularity of populist nationalist policy seems to be losing strength, it also seems to indicate strong public support for a continuation of the Grand Coalition between the CDU and SPD. Even as the parties themselves find fewer common policy items to pursue in their coalition agenda, the German public, ever comfortable with familiar, stable governance, seems to approve, with 70% registering satisfaction with the coalition’s performance in a recent Forschungsgruppe Wahlen poll.
Given the recent slip in support for the AfD coupled with favorable polling for both the CDU and the SPD, it looks increasingly likely that one of these two parties will hold a slight plurality requiring another coalition government. While it is possible that, should the SPD hold a slim plurality following the September vote, they would cobble together a majority with the other leftist parties, the resulting majority would only be by a few seats. It is unlikely that the SPD would risk such a bare majority for governing purposes, making a continuation of the CDU-SPD grand coalition increasingly possible.
Possible market response
Recent signs of a slowing in public support for Europe’s nationalist populist parties has been greeted with a favorable response from international financial markets. Following Prime Minister Rutte’s victory in the March elections in the Netherlands, the pan-European Stoxx 600 index rose by about .6%. Bond markets had a more muted response to the Dutch outcome having already priced in low expectations of Wilders’ ability to significantly impact national policy.
Similarly, the German DAX has risen over 200 points since the announcement of the outcome of last week’s Saarland state election. While still an early indicator, electoral signs of a weakened AfD have buoyed markets in advance of September’s national elections.
Much of the market reaction to Germany’s national elections may be driven by the outcome of the French presidential elections at the end of April and early May. Should Marie le Pen outperform expectations, it may raise concern that European populist nationalist parties have experienced renewed public support, raising the stakes for the September German vote.
