Andy Langenkamp is a global policy analyst for ECR Research.
The Financial Times' Gideon Rachman recently wrote: "At some point, the desperation and hopes of the refugees are likely to collide with the fears and resentments of European voters." The question is whether the outcomes of four upcoming elections will reflect the repercussions of the refugee crisis.
The refugee issue is certainly fodder for populists. Some may tend to the left, with a tendency to campaign against the evils of unfettered capitalism and the free markets. Others rail against immigrants and the threat posed by Islam. However, all of these politicians claim to detest the established order. This is precisely why voters support them.
Greece
I doubt this political trend will turn to triumph at the handful of elections that are due to take place over the coming period. The Greeks come first. On Sept. 20, voters will head to the polls for the third time in eight months. According to most polls, the Syriza party (an amalgam of various left-wing parties) under former Prime Minister Alexis Tsipras leads by a hair. Or, it may have been overtaken by right-wing New Democracy (ND). It is a very close call. Impossible to say which party will come off best on Sunday, but most polls foresee that a combination of pro-euro parties could gain approximately 70 percent of the votes. The chance is slim that the Greek elections will spook the markets. The citizens of Greece know better than most what misery can ensue if a government messes up and antagonizes its creditors. Following Syriza's brief but disastrous period of office, voters will be less keen on a cabinet that incurs the wrath of Brussels and the International Monetary Fund. I am also cautiously optimistic that the elections will help to normalize the Greek situation, because capital controls are slowly being lifted - far earlier than, for example, in Iceland and Cyprus on previous occasions.
Portugal
So the markets are unlikely to cut capers following the Greek elections. Two weeks later, the Portuguese are due at the ballot box. Portugal's incumbent center-right coalition is under fire, and there is a strong possibility that left-leaning parties will take over the helm. Yet the Portuguese bond and equity markets will take this in stride as the major left-wing parties are unlikely to abruptly change course.
Spain
Spanish elections are more crucial. Spain is the Eurozone's fourth-largest economy. In addition, the political system that has been in place since Franco's death - a system that revolved around two parties - could well morph into a multi-party system. Podemos (on the left) and Ciudadanos (on the right) have put the proverbial cat among the chickens. This creates problems for the two traditional parties, the governing conservative Partido Popular (PP) and the left-wing opposition Partido Socialista Obrero Español (PSOE). However, the two relative newcomers may well have peaked too early; they recently lost ground in opinion polls. All the same, they will probably collect enough votes to stop the PP or PSOE from governing by themselves. A grand coalition is a distinct possibility. If so, the markets will be pleased - unless squabbles and watered-down standpoints lead to political paralysis.
Ireland
Ireland will go to the polls in April 2016. The Irish economy is doing relatively well, but many voters fail to feel the effects. This could spell the end for the centrist coalition between Fine Gael and Labour. Theoretically, Sinn Féin could take part in a future coalition government, although the party is increasingly being accused of maintaining closer ties with terrorist IRA and criminal elements than it cares to admit. The party has come a long way and is a mainstream party in many respects, but its left-wing agenda would unsettle quite a few conservatives and businesses. Sinn Féin has clearly indicated it only wants to govern if it is the largest party; this chance appears remote.
If the bookies are right, a coalition between Fine Gael and Fianna Fáil is by far the likeliest outcome. I tend to agree, but there is the potential for two worrying developments. Over the summer, voters increasingly expressed their frustration because they feel that the Irish recovery is benefitting a relatively small portion of the population. This has spawned a general dislike of the political classes, which will provide opportunities to some of the non-traditional parties and independents. Still, I don't think the Irish elections will spoil the market mood.
No electoral thunder
In short, don't expect fierce electoral storms in Europe in the coming months. Occasionally, we could see dark-grey clouds or rain. For example, if the refugee crisis gets further out of hand, or the economic figures prove disappointing. On top of this, looming clouds in Spain should be monitored closely considering the scope of the Spanish economy, the likelihood that the political system will be turned on its head, and the potentially destabilizing effects of the elections in Catalonia at the end of September.
