This study was made for the Deutsche Bank (with Nikolaus Heinen)
The recent development has triggered a response in both the party system and politics: numerous EU member countries now have political movements or parties that are often referred to in debate as “eurosceptics”. They reflect a broad spectrum of parties and groups ranging from the extreme left to the extreme right. Some people may infer that the commonly used term “eurosceptic” suggests that critics only take issue with the single currency. This is not the case, though. Rather, there are various attitudes opposing the current institutional environment of the European Union, the euro as a common currency and the plans for the further deepening of integration, which is linked with a softening of national identities. Even if the interests of eurosceptic movements in the member countries differ, they have in common that they, on the one hand, take issue with the finality of European integration and, on the other, question the crisis management approach of the respective national elites. The critical conflict in society thus spans not only commercial and political perspectives, but also social and cultural ones.
The capital market’s reaction towards the eurosceptic parties improving their performance at the European elections is likely to be moderate. Most investors are probably aware that the European Parliament has no influence on acute euro rescue policy. Nevertheless, a large share of eurosceptics winning in the European elections could be perceived as evidence that the continent’s electorate does not thoroughly support the policy course in the current crisis. This is especially true given that many EU citizens are not sufficiently aware of the Parliament’s competences and would have nothing against using their vote in the European elections as a feedback channel towards national elites. Thus, after the European elections investors’ attention could be more intensely drawn towards political risks again – rather than risks in the financial system.