European elections: five things to know and market implications

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• The next European Parliament elections will take place on 23-26 May 2019 in the Member States of the European Union. Given the current complex political context, these elections are becoming a sort of referendum on the EU project, and a key political test for many countries.
• According to the polls, the elections will likely return a more fragmented Parliament, with an increased weight of populist parties, although it seems unlikely that we will see a coalition of Eurosceptic forces vs mainstream parties. The two major political forces – the European People’s Party and the Progressive Alliance of Socialists and Democrats – will likely lose their current majority. However, these two political forces are still expected to remain the two largest parties in the EU Parliament and could thus look to include other smaller proEuropean political formations under their umbrella (eg, the Greens).
• It may take more time than usual to find the right balance between parties and to form the European Commission (EC). Therefore, we don’t expect the EC to be fully operational before 2020. We believe that the emergence of a new “anti-populist” coalition may pave the way for a more pro-European agenda from 2020 onwards. This Commission will have to deal with the 2021-27 Multiannual Financial Framework that is essential for Europe’s future.