Populism and power in Europe

The European parliamentary elections are likely to deliver significant gains to populist parties. At face value, this suggests further political paralysis, delaying or derailing European recovery. But that conclusion is too simplistic. The rise of populism is beginning to drive the parties of the centre-left and centre-right together to implement reforms and sustain the European project. Indeed, the Franco-German alliance could get a new lease of life and Italy could even deliver a stable reform-minded government. However, this doesn’t change the fact that the Eurozone recovery is brittle, and the risk of a new banking or sovereign debt crisis remains higher than markets are pricing. So populist gains in the European polls are still likely to add to downward pressure on the euro.

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