Coface forecasts increased risks after the European elections

Zurich/Paris - Coface anticipates major national upheavals following the European elections on 6 and 9 June 2024 due to the rise of right-wing nationalist parties. In an internal analysis, the credit insurer and risk manager expects increased pressure on Italy and France as well as the stock markets.

According to an internal analysis from the credit insurer and risk manager Coface, the results of the recent European elections will lead to greater political and economic uncertainty as well as national upheavals. The analysis is based on the new majorities in the European Parliament.

While the conservative parties of the 27 EU member states, united in the European People's Party (EPP), performed strongly, the Progressive Alliance of Socialists and Democrats (S&D) was able to maintain its position in the European Parliament. Both groups still have a majority. However, both the Renew Europe Group and the Greens/EFA suffered heavy losses. Conversely, the authoritarian and nationalist forces in several countries increased their share of the vote.

One of the resulting risks, according to Coface, is the uncertainty regarding the exact composition of the parliament. It is not yet clear which European political groups the non-attached MEPs, totalling 100 seats, will join, it writes. The rise of the far right has increased uncertainty around the future political direction of Europe, which provides fertile ground for anti-European movements on the left and right fringes, according to the analysis.

Political uncertainty is increasing, especially in France, after French President Emmanuel Macron dissolved the National Assembly and called new elections in response to the heavy defeat of his centrist coalition, says Coface. It continues that the new parliament is likely to be even more fragmented than the current one, which could lead to a constitutional deadlock.

The pressure on the state will therefore increase, particularly in France, but also in Italy, where budget deficits are significantly higher than expected, according to the analysis. It explains that this will increase the pressure on country risks. The effects on government bonds are already evident and the interest rate environment is likely to remain restrictive for some time to come, says Coface. The credit insurer and risk manager also expects the stock markets to become more volatile, at least until the outcome of the French parliamentary elections. ce/mm