• Recent election results show the EU’s “far right” parties surging
  • Europe-wide elections are on the way in June
  • Could the EU Parliament end up with a far-right majority?

Last weekend, Portuguese voters went to the polls. The centre-right Democratic Alliance (AD) party won the most seats but far short of a majority. The far-right Chega party quadrupled its seats and emerged as controversial coalition kingmaker.

The AD leader, Luis Montenegro, has ruled out a coalition with Chega, but he will now find it difficult or perhaps even impossible to form a government without Chega’s participation.

Regardless, the results are an ominous sign of what is to come in the European Parliament elections this June. Far-right, generally Eurosceptic parties have been receiving surging support nearly everywhere. Portugal might be a small country but these election results could be an indicator of what is happening across the border in Spain and elsewhere in the EU.

Indeed, a recent Ipsos poll of European election voting intentions shows that support for the two rival far-right parties in France has risen to nearly 40%. As a much larger contributor of seats to the European Parliament than Portugal, such a figure must deeply concern the European Commission and pro-EU politicians generally.

While EU-wide polls still indicate that any EU Parliament coalition of far-right parties would fall well short of a majority, they are likely to end up with a much larger number of seats. This will make life difficult for the centre-right parties trying to navigate between the centre-left and their generally Eurosceptic right-wing counterparts.

Last month, in an article titled “This time, the far right threat is real,” Politico journalist Eddy Wax wrote the following:

In 2024, the right-wing surge in the polls seems bigger and bolder, with one predicting the nationalist right and far right could pick up nearly a quarter of seats in the European Parliament in June.

Even if the center right — currently tipped to come first in the election — refuses to form a governing coalition with ever more powerful firebrand fringe parties, there’s still a significant chance the far right will, for the first time, be able to influence Europe’s policy agenda. That will enable it to threaten the EU’s sacred values on rule of law and human rights, and block or even overturn major green and climate laws.

“We’re going to see a really significant shift to the right,” said Simon Hix, a professor of comparative politics at the European University Institute, referring to the June elections when 400 million people across the European Union are eligible to vote to send 720 representatives to Brussels.

Hix forecast the far-right Identity & Democracy (ID) grouping in the European Parliament, the sixth largest of seven, will gain 40 seats in June, meaning the group could have 98 lawmakers, vaulting into the third place currently occupied by the Liberals. It’s already home to the German extreme-right Alternative for Germany (AfD) and the French far-right National Rally (RN) party.

Then, if the current fifth largest grouping, the 67-member right-wing European Conservatives and Reformists (ECR) group — the home of Poland’s Law and Justice (PiS) and Italy’s ruling Brothers of Italy — also grows by some 18 seats, as Hix predicts, it could become the fourth largest group in Parliament, surpassing both the Greens and the liberals.

Between those projections and the 12 members of Hungarian Prime Minister Viktor Orbán’s Fidesz party, who are politically homeless, the ECR and ID could muster 25 percent of seats in the next European Parliament, according to a poll commissioned by the European Council on Foreign Relations.

The fresh results in Portugal make the above assessment for the far-right EU Parliament populist surge seem perhaps too conservative. The “threat” mentioned above, as it were, is very real indeed, and growing.

Some of the specific concerns listed above, about the far-right being against the rule of law or human rights, are open to dispute. For example, the German AfD party vigorously resisted Covid lockdown restrictions and vaccine mandates, claiming they violated basic human rights in ways not dissimilar from what the Nazis had done last century.

However, it is not disputed that the European populist far-right is increasingly opposed to the EU’s “green and climate” agenda, to which ongoing farmers’ and truckers’ protests attest. Indeed, it could well be that the issue of “green and climate” taxes, quotas and restrictions on what were once considered basic human rights and freedoms is what has been behind this most recent surge in far-right political support.

There is now also another major issue where the EU ruling elite fears the populist far-right: they tend to be anti-war, specifically anti the Ukraine war. This has been true of the German AfD from the beginning but many other far-right parties would now prefer for the EU to end its support for what they see as a pointless and tragic conflict.

It might seem a bit odd that the more prominent European anti-war parties of today are being characterised as “far-right” and that those parties supposedly on the left, including the German Greens in the current ruling coalition, are enthusiastically pro-war. But politics in Europe and elsewhere have a way of realigning from time to time.

From the perspective of the EU elite, the greatest threat of all is the general, reflex Euroscepticism of the populist far-right. These parties no longer trust the EU Commission to act in their best interests. They favour the reassertion of national power by their respective national governments. In some cases they favour leaving the EU altogether or at least holding national referenda to that effect.

Hence the EU faces a truly existential crisis, the prospect of an EU Parliament largely opposed to any further extension of the EU Commission’s powers and possibly attempting to roll them back. One or more member states may choose to hold “leave” referenda in the next few years, following Britain’s example.

Turning now to the UK, arguably the groundswell of popular support for Brexit was a political realignment of sorts. There was little if any established party loyalty that drove that particular outcome. The Conservatives and Labour were both divided, although the Lib Dems were staunch remainers. In any case the vote cut across nearly all demographics in ways the pollsters clearly couldn’t predict and perhaps still don’t fully understand.

A glance at history demonstrates that populism tends to proceed and perhaps even drive such realignments. At least once every few generations, although usually more frequently, there is a shift amongst the electorate that can completely upend politics and shuffle the deck, even absent extraordinary events such as war.

We appear to be living through one of those times. The biggest issues of the day: war, inflation, healthcare, climate and environmental policy, are no longer easily divided into left and right positions party by party. They are all up for grabs in what is becoming a populist free-for-all evading attempts by a flailing and arguably failing elite to control the terms of debate via the legacy, formerly mainstream media.

As an investor using my knowledge of economic history to assist other investors, the prospect of a general European political realignment is something of a wildcard. How to model the impact on economies and businesses? How to take advantage of uncertainty? How to profit from policy mistakes?

Fortunately, history provides a guide of sorts, however imperfect, for all of the above. History may not repeat but it certainly rhymes. Realignments past provide something of a guide to those present and future.

Here at Southbank Investment Research, we have an extensive and growing network of seasoned investors and political observers who understand the above and other challenges we face. We’re doing our best to stay one, two or even three steps ahead in the search for opportunities to profit, come what may.

Until next time,

John Butler
Investment Director, Fortune & Freedom