Financial Markets often become fixated with elections, some more than others. The upcoming European Union elections will choose 751 MEPs to the European Parliament, which along with the European Commission and the Council of the European Union forms the tripartite legislative function of the EU.
Up until very recently the UK was not going to participate in these elections, but now will for obvious reasons. 73 MEPs from the UK may yet take their seats on 1st July 2019. Quite who the UK public will elect and for what reason is difficult to read. A protest vote either from a lack of turnout or by virtue of the representatives that are elected seems the obvious conclusion. Turnout is often low in these elections across Europe, and the current record low was recorded in Slovakia in 2014 where voter turnout was a mere 13% of the electorate.
But will it matter in any way? Do these elections have any impact on economic policy in either the UK or in Europe?
Taking the UK first. Interest rate policy is set by the Bank of England and is in no way influenced by politicians in Brussels. Despite what some UK politicians might say, fiscal policy is set by the UK government. The Brexit process is a far bigger influence on the outlook for the UK economy and that is currently in the hands of the UK members of Parliament. There is likely to be a backlash against the two main parties in the UK which may accelerate the political demise of their leaders, which, although newsworthy, is again not something the Bank of England will react to.
In Europe, the elections again may well be newsworthy. There is predicted to be a rise in representation of the populist parties (Lega in Italy and National Rally in France) but the two largest groupings expected to remain in control are the European Peoples Party (EPP) and the Party of European Socialists (S&D). The European Central Bank again is independent of politicians and will not react to any change in parliament make-up and fiscal policy remains the responsibility of national governments. Oversight from the EU remains, but despite what some politicians are saying, this is unlikely to change.
So interesting, noisy and complicated, but not going to change a lot. Interest rates are low and staying low for a long time to come.