Growth failure leaves governing French left vulnerable

Significance The government's reforms have failed to deliver growth and lower employment as it had hoped. This leaves it poorly placed before December's regional elections and the 2017 presidential poll. Against a background of economic weakness, Europe's migrant crisis is boosting the National Front (FN) and its leader Marine Le Pen. Impacts Sarkozy may beat former Prime Minister Alain Juppe in the main centre-right party primary. Sarkozy may then beat President Francois Hollande in the first presidential round, and Marine Le Pen in the second. Under pressure from the right, the government is unlikely to accept further refugees beyond the proposed EU quota. France's continued economic debility will weaken its voice in the EU, and exacerbate strains with Germany.

Significance The government led by the Slovenian Democratic Party (SDS) is under mounting pressure as Slovenia prepares to take over the European Council presidency. This is due mainly to hostility in parliament and society to Prime Minister Janez Jansa, who promotes a popular but divisive form of national conservatism. Impacts A successful no-confidence vote in the government followed by early elections would complicate Slovenia’s handling of its EU presidency. The fall of the current government and its replacement by the centre-left would improve Slovenia’s relations with the EU and United States. Hungarian Prime Minister Viktor Orban would lose an ally at EU level if Jansa lost office.


Subject The Hungarian government's anti-immigration stance. Significance Prime Minister Viktor Orban and his government have been campaigning against the wave of migrants seeking refuge in Europe, and the EU's handling of the resulting crisis. The government hoped a referendum on October 2 would reject EU settlement of non-Hungarians in Hungary without parliament's consent. With a turnout of less than 50%, the referendum is null and void. Orban's Fidesz party nevertheless claimed victory, as 98.6% of those who cast a valid vote opposed relocation. Impacts The opposition to Fidesz will be able to frame the referendum as its first victory since 2010 and try to build unity on that basis. Fidesz will be unable to extend its popular support on the basis of these results. The EU is unlikely to react forcefully to constitutional amendments in Hungary, given Brexit and elections in France and Germany.


Subject Four European disintegration risks. Significance After the French presidential election, which saw the decisive victory of Emmanuel Macron over National Front leader Marine Le Pen, a sigh of relief could be heard in European capitals: the worse had been avoided; the EU would thrive again. This relief could be premature. At least four disintegration risks are still threatening the EU. Impacts Even though its economic prospects are positive, the euro-area remains fragile and could plunge back into chaos if left unreformed. An economic downturn would benefit Eurosceptic populist parties. The political uncertainty of a caretaker government in Germany will increase its officials' reluctance to agree to any euro-area reforms.


Significance One of the front-runners to replace Mattarella is Prime Minister Mario Draghi, who recently gave a strong indication that he intends to run. However, if Draghi is elected president, there does not appear to be an alternative government which could guarantee political stability and make progress on Italy’s crucial reform agenda. Impacts A situation where there is no strong alternative to Draghi’s leadership may boost the electoral appeal of the far-right Brothers of Italy. The return of political instability would diminish Italy’s leverage in the EU regarding important issues such as foreign and fiscal policy. Unless the right-wing parties perform poorly, it is unlikely that Draghi would be elected as prime minister after the next election.


Significance Given the proximity to next year’s presidential election, President Emmanuel Macron and his main rival, National Rally (RN) leader Marine Le Pen, view the regional elections as an important opportunity to test electoral strategies and build momentum. Impacts Seeking re-election could force Macron to mute his backing for the EU-China Comprehensive Agreement on Investment (CAI). He will likely use the economic crisis to campaign for more flexible EU fiscal rules and further EU fiscal cooperation. Macron will intensify efforts to tackle climate change, but be careful to not anger the working classes or those living in rural areas.


Significance These scandals are serious for the government because they reflect poorly on dozens of Conservative MPs as well as Prime Minister Boris Johnson. In addition to undermining the government’s public support, they have also damaged Johnson’s support among party colleagues. Impacts Anger towards the government could grow in poorer regions as tax rises and spending cuts are gradually introduced. The persistence of corruption stories threatens to further damage the United Kingdom’s international reputation. Domestic pressures and ‘Brexit fatigue’ may ultimately prevent London from triggering a trade war with the EU.


Subject The political outlook after the 'departement' elections. Significance Following the March 2015 'departement' elections, four candidates are emerging as front-runners for the 2017 presidential election in their respective camps. After enjoying a political comeback in recent months and seeing internal Socialist Party (PS) and other left-wing opposition sidelined, President Francois Hollande will now almost certainly be able to run for re-election as the PS candidate. Former Prime Minister Alain Juppe and former President Nicolas Sarkozy are battling for control of the centre-right, divided principally by strategy towards immigration, Islam and the National Front (FN). FN leader Marine Le Pen has emerged from a decisive showdown with her father as an even stronger far-right candidate. The political landscape has shifted to the right. Impacts Having re-established some stability around his presidency, Hollande is now unlikely to risk it by pursuing economic reforms. Hollande could aggravate divisions among the Greens and on the far left by including Green ministers in the government in coming months. As potential presidents, both Juppe and Sarkozy appear willing to engage in substantial structural reform. Jean-Marie Le Pen's final political exit will allow a new generation to take definitive charge of the FN and complete its 'detoxification'.


Significance Like all European countries, France is facing increasing pressure from large-scale migration. While the government has so far been reluctant to welcome refugees, most candidates from the right and far-right call for an even more restrictive policy and are engaged in a fierce rivalry to offer ever-harder stances on immigration. Impacts The Calais 'jungle' is likely to be dismantled at least temporarily so the government can give the appearance of determination. A hard line will prevail regardless of the result of the next election, for fear of further increasing support for the National Front. In the light of the tense national context, some cities such as Paris will seek to develop local pro-migrant policies.


Significance Prime Minister Theresa May has committed herself to triggering Article 50 by the end of March 2017. No member state has made use of Article 50 and there is thus much uncertainty about what leaving and, more specifically, triggering Article 50 might involve. Impacts May's timetable could be derailed if the Supreme Court decides that the government cannot invoke Article 50 without parliamentary approval. The EU is likely to maintain its firm stance and refuse to engage in any negotiations before Article 50 is triggered. The continued uncertainty over the terms of Brexit is likely to hit business confidence and could deter investments.


Subject EU-Swiss bilateral relations. Significance The relationship between Switzerland and the EU is functional but difficult. Despite some progress on the Mutual Recognition Agreement (MRA) that secures market access for a range of products, a breakthrough is still needed on the most important issue, the institutional framework for sectoral agreements. Negotiations have slowed and the Swiss government faces difficult decisions on the right timing and strategy. Impacts The Swiss government’s decision to resume discussions on new 'cohesion payments' to the EU is likely to create goodwill in Brussels. In the short term, Switzerland's economy and trade are unlikely to suffer from the stalemate in the Swiss-EU political relationship. With Ignazio Cassis as foreign minister, the government is likely to become more sceptical of the EU.


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