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European elections: A political risk for the financial markets

fear The election has begun: Not only many citizens, but also the actors on the financial markets, an increase in EU-critical and right-wing populist parties -

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European elections: A political risk for the financial markets

fear The election has begun: Not only many citizens, but also the actors on the financial markets, an increase in EU-critical and right-wing populist parties - with good reason. The Cohesion of the EU is at the game, in particular, Italy is in the spotlight.

"Political stock markets have short legs" is an oft-quoted wisdom on the stock exchange. This means that the financial markets respond mostly only in the short term, and limited to political crises and events. In the longer term, particularly the results of the company and the state of the economy are crucial, they say. This time things could be different, murmur, many market observers and experts before the European elections.

election posters for the European elections in the Netherlands

Because the more seats in Parliament populists and Euro-sceptics conquer, the more difficult could be the Situation for the EU. The large party families, the Christian Democrats and social Democrats have to fear in comparison to the 2014 election, significant losses.

"This will make decisions in Brussels even harder, because in the EU Parliament and more parties must agree, and the national governments will be even less willing to compromise", writes Commerzbank expert Ralph Solveen in his analysis to the choice. And the likelihood of this scenario is to entry are reasonably high.

Following the European election, a political earthquake?

"According to our forecasts, the populists and Euro-sceptics at this year's EU-could-conquer-the Parliament election, in the extreme case, about 30 percent of the seats," writes Andrea Iannelli, Investment Director at asset Manager Fidelity. The center-Right and-left parties would, according to Iannelli, for the first time in the minority.“ Other observers come to similar Figures.

"the outcome of The election will complicate the much-needed closer European Integration and at the same time, the growing illustrate the gap between Europe's citizens and political leadership," AllianceBernstein, says Darren Williams, Director of Global Economic Research at the Asset Manager.

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24.05.2019 07:04 PM

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the economic situation and employment prospects, the voters are particularly important, such as a spring survey of the European Parliament has shown. Migration and the fight against terrorism would lose, therefore, in the priorities on the ground.

"Difficult to keep, a single currency"

Just in the economic field, there is a lot to do: The biggest challenge for the European Union, the path to convergence and harmonisation, is Jean-Marie Mercadal, CIO at the French asset Manager OFI Asset Management, is convinced. "In view of the different debt ratios in relation to gross domestic product, budget deficits, taxes, and regulations of the member States, it is very difficult to keep a single currency," says the expert.

Matteo Salvini

in Particular, the question of fiscal policy is of crucial importance: "While in the periphery of the resistance against the EU fiscal rules is growing, there are some core European governments under pressure, no measures to approve, which was developed by the Euro-zone in the direction of a transfer Union," writes Daniel Lenz, an Analyst at DZ Bank.

Populist forces on the right as the left would demand, according to Lenz, is a departure from the austerity policy. In agreement with most observers that, from Italy, is a special risk for the markets run out. "Our goal is to win the EU elections and to change the rules in Europe", announced the head of the Italian Lega, Vice-Premier Matteo Salvini.

problem child Italy

Should cut off the right-wing populist Lega strong, he will cancel the government coalition in Rome in may and new members to aspire to, predicts Ulrich Stephan, chief investment strategist for Private and corporate clients at Deutsche Bank. Italy is the third largest economy in the Eurozone. The country has a share of around eleven percent of the real gross domestic product of the EU countries. For the owners of Italian government bonds, so the creditors in Italy, that would be very bad news.

Italian budget deficit-to-GDP ratio

"Italy has one of the largest debt amassed mountains among the industrial countries. The country sliding into a recession and at the same time, its current spending policy to maintain, could increase the debt ratio more solid. The government is projected to decline to under 130 per cent would thus be a waste,“ say the experts of the investment Manager Fidelity.

This, in turn, would mean that Italy would fight on the bond market with rising risk premiums, the debt would thus be more expensive. Evidence on the bond market there are already. In the worst case, this could even lead to problems in refinancing and a resurgence of the Euro crisis would be the result.

turnout in European elections

Unfortunately, that's not all: Also in Greece and Spain, the Opposition to the EU-waxes, rules, notes, DZ-Bank expert Lenz. "Return, more and more countries, the current reform policy, that poses significant dangers for the Euro-zone." Therefore, the outcome of the election is so important for the citizens. Over whose fate the events in the financial markets and stock exchanges with determine now whether we like it or not.

Robert Halver market strategist of the Baader Bank stressed: "We need a high turnout to show the world that Europe is its citizens, no matter, but a high level of importance."

source: boerse.ard.de 13.04.2019, IMF on the situation in Europe: Germany and more: Dax output: Everything is possible! Oil prices pull back to 5G-auction: bids already over 6 billion euros

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