Brexit and Trump: Defying the odds, vocal populists have won the two major popular votes in the western world this year. The success of Boris Johnson and Donald Trump raises an obvious question: could it happen elsewhere in Europe?
After all, the parallel to the anti-Washington rage in the US is a rejection of the European Union; the parallel to Trump’s anti-NAFTA rhetoric is the threat to reverse the process of European integration that, jointly with NATO, has been the cornerstone of peace and prosperity in Europe since the 1950s.
France: the crucial country
Brexit poses a serious risk to trend growth in the UK without any major impact on the much wider EU economy. Although Italian prime minister Matteo Renzi may well lose a constitutional referendum on 4 December, the Italian risk would probably be containable. But like Germany, France is indispensable. Could Front National leader Marine Le Pen win the presidential election on 7 May 2017, possibly even trying to take France out of the EU or euro afterwards? If so, it could spell the end of Europe as we know it.
The Brexit vote gave no boost to right-wing populists elsewhere in the EU. Instead, the uncertainty that befell the UK thereafter strengthened pro-EU sentiment in some EU members. Trump has fewer fans in Europe than in the US. The example his style has set may even put off some wavering voters, although others may say that the calm market reaction to him makes a vote for populists feel less unsafe. If he follows up on his brazen protectionist promises, the resulting trouble for the US may have some voters in Europe think twice about going down the same route. If he does not follow up on his anti-China, anti-trade and anti-immigrant rhetoric, he might expose himself as phony ahead of the French vote on 7 May 2017.
A Clinton-Sarkozy parallel?
The decisive second round in France will most likely pit Le Pen against the winner of the centre-right primaries on 20 and 27 November 2016, either former prime minister Alain Juppé or – slightly more likely in our view – ex-president Nicolas Sarkozy. A Le Pen-Sarkozy duel could invoke parallels with the US vote. Almost like Hillary Clinton, Sarkozy is seen as a divisive old-timer with significant baggage.
The message of the polls
In opinion polls, Le Pen has consistently trailed well behind Sarkozy and, even more so, behind Juppé so far. But in the case of Brexit and Trump, the polls underestimated support for the right-wing populists by about three percentage points. If this happened in France, Sarkozy would still win, although only by 55% to 45% instead of 58% to 42%. But it would be uncomfortably close.
Vive la difference?
How badly could the French polls misjudge the mood? Johnson and Trump were TV personalities before they turned their star appeal to national politics. Le Pen does not have this advantage. The votes in the UK and the US were the first of their kind, with a US candidate rejected even by his party’s mainstream on the ballot. That made the polls particularly unreliable. Le Pen has been around for a long time. Opinion polls had understimated the Front National by 1.9 points each in the presidential election of 2012 and the European election of 2014 but overestimated the Front National by 1.4 points at the parliamentary election in 2012 and by 0.3 points at the regional elections in December 2015. There is no clear and threatening pattern here. We are fairly confident that Le Pen will not win. Still, we need to monitor the political risks very closely.
Berenberg’s chief economist Holger Schmieding and senior UK economist Kallum Pickering