Trying to look beyond to what the day after looks like is important, particularly at a political level. Will it be a blow or a boost to the populists? In the US, France and Germany it looks like it will be a reminder to voters of the damage populists can do. There is a broad feeling that serious government is required.
As we expected, Matteo Salvini was defeated in Sunday’s Emilia-Romagna regional election, providing a much-needed boost to Prime Minister Conte’s fragile government and making a snap general election less likely.
Does populism pose a risk to markets in 2019? Yes! but not from the expected quarter. 2019 brought a surprise on the European front. The support for traditional parties has been plummeting for a long time. We call this the European souffle where support for the centre ground continues to cave over time. Populist parties gained 20% or more of the vote in many national elections this year, thought there were signs of their vote stabilising in the most recent polls.
The UK election campaign will be one of two strategies. The Tories will build their case around their Brexit deal while Labour will try and create a narrative around the future for Britain over the next five years (trying to move beyond their promise to renegotiate and offer the deal to the electorate via a second referendum which is likely to be on the manifesto).
The collapse of Spain’s centre-left government has sounded the alarm bells. The country will now go to the polls in April, its fourth election in eight years. However, this does not mean populist parties are about to take over.
A deal to suspend development of Iran’s nuclear programme might avert a more immediate showdown, but it will leave few…