Last weekend, Europeans went to the polls to elect members of the European Parliament for its next 5 year term. For the first time in 25 years, turnout broke the 50% barrier. And for the first time in the parliament's 40 year history, the center-right European Peoples' Party (EPP) and center-left Socialists & Democrats (S&D) have lost their combined governing majority. The new parliament will require the EPP and S&D to work with the centrist Alliance of Liberals and Democrats (ALDE + French President Macron's Renaissance Party) as well as the rising Green Party to find sustainable majorities. It is, however, important to underline that the pro-EU center has held.
In contrast to the fears of many, the rightwing populists and Euroskeptics failed to add significantly to their numbers in Brussels. The Euroskeptics (EFDD and ENF) will represent roughly 15% of the Parliament, a slight increase from the last parliament, but far below the 1/3 or more that was feared before the election. Even if you add in the UK's Brexit Party (which will leave the Parliament after Brexit) and the far-left populist group--the total number of anti-EU MEPs is still less than 24%.
While the EPP and S&D were especially hard hit, losing 38 and 35 seats respectively, the EPP will gain back much of its loss in influence once the UK (theoretically) leaves the EU. British MEPs from the Labour Party will leave the S&D group, the Brexit Party members will leave the Euroskeptic wing, and the Liberal Democrats will leave ALDE. As the UK has no representation in the EPP, it will emerge proportionally stronger after Brexit.
Winners & Losers
The big winners of the night were the centrist ALDE party and the Greens. ALDE was boosted by the collapse of the French left and right in favor of Macron's Renaissance Party and Le Pen's populists. The Greens were strengthened by especially strong results in Germany (where they placed second) as well as the UK (where they beat out the Conservatives for 4th place) and in France.
Germany's center-left SPD earned its worst-ever score of just 15.6%. UK voters punished both the Conservatives and Labour for neither delivering Brexit nor promising a viable way forward (i.e. via a clear position in favor of a second referendum). Italy's governing 5 Star Movement was crushed by its junior partners, the far-right, anti-immigrant League party.
Poor results by both the governing party in Belgium and Greece created political uncertainty at the national level. Belgium will struggle to create a government given the political fragmentation and the rise of the far-right nationalists in Flanders. In Greece, PM Tsipras' party suffered heavy enough losses where the government called snap elections that it is expected to lose in July. Meanwhile, the Austrian government lost a vote of no confidence so a new election is coming there too, though the governing conservatives are expected to prevail.
What Happens Next?
A series of difficult conversations between national leaders is forthcoming. The divided result will make it incredibly difficult for Europe to find the necessary compromises to agree upon a candidate for the European Commission presidency and other top jobs including Council President, President of the European Parliament, and President of the European Central Bank.
There are sharp disagreements about whether the EPP's lead candidate ("spitzenkandidat" in German), Manfred Weber, should be named Commission President as the leader of the largest party in the new parliament. German Chancellor Merkel is supporting her fellow German conservative, but others including President Macron, Prime Minister Rutte of the Netherlands, and PM Sanchez of Spain are firmly opposed.
Compromise candidates like current Competition Commissioner Margrethe Vestager or the EU's lead Brexit negotiator Michel Barnier may yet emerge as the next Commission President. Others are possible as well, including Rutte himself, outgoing Belgian PM Charles Michel, or possibly former Lithuanian President Dalia Grybauskaitė, who would represent Eastern Europe and would provide much-needed gender balance in EU leadership.
After an inconclusive first meeting of the European Council to start debating candidates on Tuesday, European Council Donald Tusk gave his fellow heads of state and government a deadline of the next Council meeting on June 20-21 to agree on a compromise slate of candidates. The next Parliament will take its seats on July 2, and the aim is to begin discussions to confirm the next Commissioners in September, so that new Commission can assume its role on schedule in November. That timeline is subject to serious delay, potentially into 2020, if the Council cannot agree who should take the top jobs.
Potential Implications for Policy
Whoever becomes Commission President will have to present a coherent policy agenda--which itself will be subject to major compromises between the main 4 pro-European parties (S&D, Greens, ALDE, and the EPP). Given the rise in influence of the Green Party, a renewed focus on climate policy is all but certain. France and Germany will press for a review of EU competition policy and procurement policy. These changes will be aimed at countering a rising China, but will carry concerning potential implications for American investors. The Commission is also likely to press for a consolidation of power in European tax policy--though the vetoes from countries like Ireland, Scandinavia, Luxembourg, and others will remain.
Finally, it seems likely that the next Parliament will be significantly more protectionist than the current one. The large contingent of MEPs from Macron's Renaissance party are instinctively anti-free trade, to the contrary of the typical pro-business outlook of their ALDE partners. Moreover, the Green Party has reflexively voted against all EU trade agreements. This change could have significant repercussions for the nascent U.S.-EU trade talks, if those talks produce an agreement that must be ratified during the Parliament's coming term.
We will closely watch and engage with the European institutions as this transition continues, ensuring the views of the business community are well understood. As always, please do not hesitate to reach out if you have specific questions about the implications of the elections for your industry or company.