The forthcoming European Parliament elections scheduled for June 6-9, 2024, loom large with potential implications for EU financial markets. Structural shifts in parliamentary seats, particularly across various parties and coalitions, hold the power to influence the direction and momentum of the broader EU economy.
The Economic Security Strategy aims to leverage the EU’s economic openness while mitigating risks posed by geopolitical tensions, accelerating technological advancements, and economic interdependencies. A primary objective of this strategy is to enhance EU competitiveness and fortify the EU single market.
According to MSCI Economic Exposure data, which tracks the geographic distribution of firm revenues, European countries have seen substantial growth in revenue from the U.S. and Chinese markets over the past decade. For example, Germany’s economic exposure to the U.S. increased from 17% in 2013 to 23% in 2024, and its exposure to China grew from 6% to 8% during the same period. Similarly, France saw its economic exposure to the U.S. rise from 15% to 21%, and to China from 5% to 9%.
Maintaining these economic interdependencies may necessitate restructuring EU companies’ supply chains and fostering domestic technological advancements. The success of these long-term initiatives hinges on attracting capital inflows and ensuring political stability across the region.
Footnotes
- The allocation of MEPs across EU countries is proportional to their population, ranging from 6 to a maximum of 96 seats per country. As of April 30, 2024, France and Germany collectively accounted for 40% of the market capitalization in the MSCI Europe ex UK Investable Market Index. The largest markets included France, Switzerland, Germany, the Netherlands, and Denmark, with Italy and Spain ranking seventh and eighth, respectively. Poland, classified as an emerging market, slightly surpasses Ireland in market capitalization. (Source: MSCI)
- Cunningham, K., Hix, S., Dennison, S., Learmonth, I. “A sharp right turn: A forecast for the 2024 European Parliament elections.” European Council on Foreign Relations, Jan. 23, 2024.
- Recent global events such as the COVID-19 pandemic and Russia’s actions in Ukraine, alongside rising geopolitical tensions, have exposed economic vulnerabilities in the region. The EU’s response includes a proposed strategic framework to identify and mitigate risks to economic security.
- Addressing the threat posed by climate change and environmental degradation, the European Green Deal aims for net-zero greenhouse gas emissions by 2050. One-third of the EUR 1.8 trillion from the NextGenerationEU recovery plan and the EU’s long-term budget (2021-2027) will support this transformation, targeting a 55% reduction in emissions by 2030.
