Europe’s upcoming elections might tip political balance

European_Elections.jpg

Europe faces a slew of national elections in the coming weeks and the new coalitions will have an impact on tackling the economic crisis and making the crucial adjustments for reform.

Germany: Grand or narrow coalition?

Federal elections in Germany (to renew parliament, the Bundestag), which will take place on 27 September, have been most prominent on the radar of international financial markets, keen to see what will happen in Europe’s linchpin economy (EURACTIV 25/08/09).

Despite German Chancellor Angela Merkel’s party suffered losses in regional elections (EURACTIV 31/08/09), she is seen likely to stay in power. The key question remains whether Merkel will do well enough to be able to ditch her current grand coalition to move to a tighter, centre-right coalition between her conservative bloc and the business-friendly Free Democrats (FDP) (EURACTIV 21/08/09).

A poll last week showed the support for the conservative grouping – the Christian Democratic Union (CDU) and Christian Social Union (CSU) – slipping to a three-month low, meaning she might need to again join with the rival Social Democrats (SPD).

Policy differences between the two most likely coalitions are relatively slight, although a centre-right alliance is seen likely to cut public spending more as well as some taxes.

Expectations of Germany’s first grand coalition since the 1960s were low when it was formed in 2005, but it has been more successful than most expected, praised for its handling of the financial crisis and moves to balance the federal budget.

In principle, a narrower coalition should make policymaking easy and swifter for Merkel but she would lose one advantage of the grand coalition, its dominating majority in Germany’s lower house of parliament which allowed it to push through legislation with little or no opposition.

Greece: Eurozone’s soft underbelly?

In some ways, the riskiest election for the euro zone could be Greece’s snap election called for 4 October, which opinion polls suggest no party will win outright although the left-wing opposition PASOK party remains ahead (EURACTIV 03/09/09).

Greece is seen as one of the euro zone’s weakest links, with its second-highest debt as a percentage of gross domestic product, seen as 103.4% in 2009.

Investors and ratings agencies would like to see sharp budget cuts and other reforms to avert crisis – but this will prove difficult if no clear winner emerges.

Most analysts would expect the European Union to provide financial support for Greece, stemming any default risk. But the cost of supporting the euro zone’s most vulnerable economies – Greece and Ireland – is seen as a potential threat for the euro and the sovereign debt of the zone’s largest economies, particularly Germany, which would end up effectively footing the bill.

The danger of either country facing a serious crisis is seen as having fallen since the height of the global market slump last year and earlier this year, but both are still seen as having to make sharp budget cuts and other adjustments to protect control ballooning deficits.

In Greece, both main parties have committed themselves to reforms but in reality may struggle, facing public opposition and potentially social unrest and trade union action.

A weak coalition government would make that process even more difficult.

Portugal and Norway: Weaker governments ahead?

Opinion polls put Portugal’s ruling Socialists ahead of opposition Social Democrats in a 27 September general election but without enough of a lead to win an overall majority, potentially ushering in a period of political turbulence and unpredictability.

Prime Minister Jose Socrates’ campaign hopes to draw more supporters from the far left, saying the election will help determine the future of the welfare system at a time of rising budget deficits.

The main opposition Social Democrats have pledged to slash the state role in the economy and halt big infrastructure projects to bring public debt under control.

Norway’s centre-left coalition may lose its majority in a parliamentary election next Monday (14 September), opinion polls suggest, raising the prospect of minority rule by the centre-left or centre-right and leaving smaller parties as kingmakers.

Prime Minister Jens Stoltenberg’s Labour Party has so far refused to say what it would do if its coalition with the Socialist Left and Centre Party lost its majority.

It could try governing in a minority coalition, or possibly step down and give the fractured opposition a chance to govern – most likely also as a minority administration.

Passing the 2010 budget and other legislation is likely to be much more difficult in a hung Parliament with arguments likely to centre over use of oil revenues, reform of the welfare state and oil and gas exploration in the Arctic.

Ireland: Can coalition survive?

Hit by the financial crisis worse than any other eurozone economy, Ireland would likely hold snap elections if Prime Minister Brian Cowen’s highly unpopular government lost the support of its junior coalition partner the Greens.

Analysts say the government could collapse if Irish voters reject the EU Lisbon Treaty on 2 October’s referendum, or if it fails to push through an unpopular banking reform legislation in a vote to take place shortly after the poll. A budget vote in December could also prove a crunch point.

Like Greece, Ireland needs to make stark austerity measures to avoid further crises that could spill over into the rest of the euro zone, reforms that could be imperilled by internal politics.

Polls still predict a likely ‘yes’ vote for Lisbon but have shown a shift towards ‘no’, with the government’s unpopularity seen boosting the chance of a treaty rejection (EURACTIV 04/09/09).

The government is trying to bring together bad banking debts under a state-run National Asset Management Agency (NAMA), and the Greens are under pressure from their own membership to water down the legislation and proposed austerity measures.

Polls suggest both Cowen’s Fianna Fail and the Greens face a wipeout if elections are held.

Czech Republic: Vote delay threatens reforms?

The Czech Republic had been due to hold elections on 9-10 October, but the Constitutional Court effectively suspended the poll last week pending a ruling on a complaint against the vote from an independent deputy.

Major Czech political parties have agreed to instead aim for an election in November, possibly 6-7 November.

The country has been run by a non-partisan interim government since a centre-right coalition collapsed in March, but essential decisions – including over the budget deficit – have been left until after the election (EURACTIV 25/03/09).

A poll late last month showed the leftist Czech Social Democrats (CSSD) extending their lead over the main right-wing Civic Democrats (ODS), but with no party expected to win an overall majority.

The Social Democrats would be expected to run a minority cabinet backed in Parliament either by the far-left Communists, or a coalition with two other small parties or in a grand coalition with the Civic Democrats.

(EURACTIV with Reuters.)

Germany, Norway, Portugal and Greece are all due to hold national elections in late September or early October, while Ireland's Green Party has warned there is a 40% chance they might quit the ruling coalition in the coming six months, sparking snap polls.

The Czech Republic was due to hold elections on 9-10 October and still potentially could, but the Constitutional Court effectively suspended the vote last week while it considers a court challenge. 

  • 14 Sept.: Parliament elections in Norway.
  • 27 Sept.: Federal elections in Germany.
  • 27 Sept.: General elections in Portugal.
  • 2 Oct.: 2nd referendum in Ireland on Lisbon Treaty.
  • 4 Oct.: General elections in Greece.
  • 9-10 Oct.: Initial date for elections in Czech Republic.
  • 6-7 Nov.: Possible date for elections in Czech Republic.

Subscribe to our newsletters

Subscribe