It’s been a year of upheaval across some parts of Europe with snap elections, unexpected polling results and changes of leadership. In France, the Netherlands, Germany and the UK, government elections have punctuated 2017 and to an extent, all of them have provided us with periods of uncertainty.
So, can we look forward to more of the same in 2018 or are we likely to expect a period of relative stability compared with the developments across the previous twelve months?
In the weeks leading up to an election the air of uncertainty can affect a country in a number of ways: The economy can face a slow down with a dip in public spending and in turn, this can spread to the trading markets where the currency in question can face a hit.
What happens after that will largely depend on the result of the election itself. If the poll is a predictable one and if the ruling party is returned with a comfortable majority, the likelihood is that economic stability will follow its political counterpart.
However, if the forecasters get it wrong and the exit polls fail, as they have done across Europe and beyond, chaos can ensue.
2017 saw national elections take place in Germany and in the UK and while the ruling parties were returned in both cases, the outcome was far from comfortable for those directly involved. In Great Britain, ruling Conservative Prime Minister Theresa May took the gamble to call a snap vote in June in an effort to get a rubber stamp from the electorate and to form a ‘Strong and Stable’ government for the next five years.
The punt backfired however and the current ruling party is some way from offering strength and stability to Britain right now. The Pound was already on a downward spiral due to the continued ramifications of Brexit and the uncertainty that followed the British minority government only served to see Sterling drop even further.
In Germany, a similar outcome happened although Angela Merkel’s grip on power seemed a little more solid after the Federal Election vote at the end of September. However, fast forward two months and failure to secure an effective coalition leaves the country in a state of flux with talks on the subject unlikely to resume until the New Year.
In the interim, both countries have seen calls for their leader to step down amidst reports of challenges from within the respective parties. And, in the UK, few observers are ruling out the possibility of the country’s voters returning to the polls for yet another election in 2018. Along with protracted Brexit negotiations, the UK lurches from crisis to crisis with no end in sight just yet.
As far as confirmed elections in 2018 are concerned, our attention switches to Scandinavia where Sweden is set for the vote in September. Elsewhere, it’s all relatively quiet so that, at least, looks to be a positive point.
However, while there may be a lack of elections on the horizon, the knock on effect from polls in the UK and in Germany means that we start the New Year with further uncertainty. For the sake of the strength of the pound and the euro, those situations must be quickly resolved.