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Macron Calls Snap Election After Far-Right EU Defeat

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France’s President Emmanuel Macron has called a snap parliamentary election after a significant defeat by the far-right National Rally party, led by Marine Le Pen and Jordan Bardella, in the European elections. This unexpected move came as exit polls indicated that the National Rally secured over 30% of the vote, double that of Macron’s centrist Renaissance party. While France’s far-right victory was notable, the broader European election narrative saw the centre-right parties strengthening their hold on the EU Parliament, achieving successes in countries like Germany, Greece, Poland, and Spain.

Ursula von der Leyen, head of the European Commission and a prominent figure in the centre-right European People’s Party (EPP), highlighted that despite gains by both far-left and far-right factions, the centre-right remained a stabilizing force. Von der Leyen reaffirmed the EPP’s commitment to alliances only with the Socialists & Democrats and the liberal Renew group, excluding any collaboration with far-right groups.

Germany’s elections saw the conservative CDU come out on top, whereas Chancellor Olaf Scholz’s SPD experienced its worst-ever European election result, finishing behind the far-right Alternative for Germany (AfD). In Italy, Giorgia Meloni’s far-right Brothers of Italy continued their dominance, while in Austria, the Freedom Party was poised for an unprecedented victory in the European vote.

Elsewhere, Hungary witnessed a new challenge to Prime Minister Viktor Orban’s dominance with the rise of Peter Magyar’s centre-right Tisza party. Spain’s centre-right Popular Party narrowly defeated the Socialists, while far-right Vox came in third. In Denmark, the opposition Green-Left party achieved a surprise victory, and in Slovakia, the liberal Progressive Slovakia party triumphed over the ruling Smer party.

Overall, while the far-right made notable gains in specific countries, particularly France, their surge was less pronounced across Europe than anticipated. The centre-right’s consolidation of power, however, underscores a continuing preference for more moderate political forces in the EU.

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Eurozone cuts interest rate for first time in 5 years

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The European Union has become the second major economy this week to reduce its lending rate, indicating progress in addressing inflation. The European Central Bank (ECB) cut its main interest rate from a record high of 4% to 3.75%, following Canada’s decision to lower its official rate on Wednesday. This decision coincides with EU-wide elections, reflecting public discontent over living costs.

ECB President Christine Lagarde stated that the inflation outlook has significantly improved, allowing for the rate cut. However, she cautioned that inflation would likely remain above the 2% target “well into next year,” averaging 2.5% in 2024 and 2.2% in 2025. Lagarde emphasized that the ECB would maintain a restrictive interest rate policy as needed to achieve the 2% target, without committing to a specific rate trajectory.

Lindsay James, investment strategist at Quilter Investors, noted that the rate cut was anticipated but still a relief for European consumers and businesses. She mentioned that the ECB’s move precedes potential cuts by the Bank of England and the US Federal Reserve, providing needed economic stimulus.

Despite a slight increase in inflation in May to 2.6% from 2.4% in April, the ECB decided to reduce rates. This follows Canada’s reduction from 5% to 4.75% after their inflation fell to 2.7%. Sweden and Switzerland have also made similar rate cuts.

Lagarde provided a positive economic outlook for the eurozone but warned of challenges such as geopolitical tensions and climate-related risks that could impact growth. Katherine Neiss, chief European economist at PGIM, expressed confidence in further ECB rate cuts over the summer or autumn, potentially lowering eurozone rates to 3.5% or less by year-end. She cited sluggish economic recovery, slowing inflation, and easing wage growth as justification for additional cuts.

In the UK, speculation exists that the Bank of England might reduce rates as early as this month, with inflation down to 2.3% from its peak over 11% in late 2022. The International Monetary Fund recommended cutting UK rates from 5.25% to 3.5% by year-end. However, George Godber from Polar Capital suggested that the upcoming UK election could complicate the Bank’s rate decision on June 20, as political considerations might influence the outcome.

The US Federal Reserve is also expected to reduce rates soon, with the current US inflation rate at 3.4%. Godber predicted that the Fed would act before the November election.

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Greenlash: Rising Opposition to EU Green Policies Amid Economic Strains

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Across Europe, there’s a significant pushback against green policies, termed a “greenlash.” This contrasts starkly with the sentiment during the last European elections five years ago, when especially young voters were fervently demanding action against climate change.

The current resistance is fueled by soaring energy prices, partly due to Russia’s war in Ukraine, and a broader cost of living crisis, prompting many Europeans to reconsider the move away from fossil fuels. Additionally, farmers across Europe have staged roadblocks in protest against environmental reforms.

This shift could pose a serious challenge for the EU’s Green parties in the upcoming elections from June 6-9. The Greens/European Free Alliance (G/EFA), currently the fourth-largest group in the European Parliament, might see a 30% reduction in their seats according to most polls. Terry Reintke, the Greens’ lead candidate, warns that if right-wing groups gain more influence, they could obstruct substantial parts of the parliament’s agenda.

Such an outcome could significantly affect the implementation of the EU’s Green Deal, part of the Climate Law aimed at achieving carbon neutrality by 2050. Some measures have already been enacted, like the package to cut net greenhouse gas emissions by 55% of 1990 levels by 2030, which includes a contentious ban on petrol and diesel cars by 2035. However, many policies essential for meeting 2040 targets still need to be agreed upon, and existing directives could be modified under sufficient political pressure.

Right-wing parties across Europe have quickly responded to public discontent, balancing costly decarbonization processes and green investments against the cost of living crisis. In Italy, Matteo Salvini of the far-right League criticizes the 2035 ban on petrol and diesel cars, viewing it as a “gift” to the Chinese electric car industry. Hungary’s Viktor Orban supports farmers protesting in Brussels and accuses European leaders of ignoring ordinary people.

In Germany, backlash over plans to ban new oil and gas heating systems almost toppled the coalition government, leading to a watered-down policy. The far-right AfD, decrying an “eco-dictatorship,” is challenging for second place in the polls. Similarly, in the Netherlands, government plans to reduce nitrogen oxide emissions sparked farmer protests and boosted the Farmer-Citizens Movement (BBB), now set to join a coalition with Geert Wilders’ Freedom Party, which aims to roll back green policies.

Sweden, once a leader in climate action, has seen its government, supported by the far-right Sweden Democrats, criticized for policies that could increase emissions. In Spain, the far-right Vox party denies human-caused climate change and seeks to undo recent green policies.

Hannah Neumann, a German MEP from the Greens, refutes the radical right’s narrative that economic competitiveness and climate protection are mutually exclusive, emphasizing that the global shift towards net zero includes major economies like the US and China. She warns that the EU risks falling behind if it slows its green transition.

However, center-right parties also challenge the speed and cost of this transition. The European People’s Party (EPP), the largest group in the European Parliament, has long opposed the 2035 ban on petrol and diesel cars. Farmers’ protests have also led to reversals of Green Deal policies, such as scrapping a proposal to halve pesticide use.

Jessica Polfjärd, an MEP from Sweden’s Moderate Party, acknowledges the urgency of climate issues but stresses the need for realistic and balanced policies. She argues that overly ambitious green policies have not provided industries with adequate tools for the transition and that their impacts need thorough assessment.

Despite the backlash, climate change remains a significant concern for European voters. A recent Eurobarometer survey found that 78% of respondents feel environmental issues directly impact their lives, and 84% believe EU environmental legislation is necessary. Yet, only 58% want to speed up the transition to renewable energy, with cost of living concerns dominating the current campaign landscape, potentially leading to significant losses for the European Greens compared to five years ago.

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German far right in disarray after AfD Nazi remark

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Maximilian Krah, a prominent far-right German politician from the Alternative for Germany (AfD), announced he would scale back his campaign efforts for the upcoming EU elections while remaining the party’s lead candidate. This decision followed a controversial interview with the Italian newspaper La Repubblica, where Krah remarked that not all SS members were automatically “criminals” and emphasized assessing individual culpability. He referenced Günter Grass, the German novelist who served in the Waffen SS, to support his point.

The SS, or Schutzstaffel, was a Nazi paramilitary group notorious for its central role in the Holocaust and other war crimes. Krah’s comments provoked a strong reaction, leading France’s far-right National Rally (RN) to sever ties with the AfD in the European Parliament. RN leader Marine Le Pen called for a “cordon sanitaire” to distance her party from the AfD, stating the urgency of this separation due to the extremity of Krah’s views.

The relationship between RN and AfD had already been strained following a secret meeting involving AfD members discussing the mass deportations of non-ethnic Germans. Marine Le Pen had previously condemned such ideas.

Facing mounting pressures ahead of the EU elections in June, Krah declared on social media that he would step back from public campaign appearances and resign from the federal executive board to preserve party unity. This decision comes amid various scandals, including the arrest of one of his staffers for alleged espionage for China and an ongoing investigation into Krah over purported payments from Russia and China, which he denies. Despite these controversies, the AfD remains a significant political force, polling second or third nationally and leading in some states set for local elections later this year.

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