European leaders aiming to curb the rise of populist parties in the upcoming 2024 elections may find little support from the economy, even if the European Central Bank opts to cut interest rates. Despite projections of global and euro-zone growth, subsiding inflation, and potential reductions in borrowing costs, these factors might not contribute significantly to a positive political climate in time for the European Parliament elections in June and the German state elections in September.
The German political landscape, in particular, faces challenges, with Chancellor Olaf Scholz’s coalition dealing with budget disputes and increased support for the AfD. Elections in three eastern states, where the AfD leads in polls, add to concerns, aggravated by strikes and protests in various sectors.
While there’s optimism regarding limited labor-market weakening and anticipated economic improvement, ECB President Christine Lagarde remains cautious, citing near-term weakness in incoming data. The International Monetary Fund’s outlook indicates a moderate acceleration of euro-area expansion to 0.9% in 2024.
Even if the ECB cuts rates, the immediate impact on growth is uncertain, as policymakers weigh the risks of inflation. Analysts suggest that the economy might not see noticeable improvements in time for the elections, emphasizing the ECB’s focus on maintaining price stability.
The potential easing of the cost-of-living crisis could resonate with voters, but concerns persist. Eurobarometer surveys reveal a majority feeling a reduced standard of living in 22 countries, and Germany faces challenges in reaching the ECB’s inflation goal.
Apart from economic factors, voters are also influenced by issues such as immigration and the war in Ukraine, reflecting deeper sentiments fueling the rise of populist parties. Economic anxiety, job insecurity, and fears about the future contribute to this shift.
Despite the expected surge of EU-skeptic parties in the June elections, governments have limited financial flexibility due to debt consolidation efforts. Citizens may face economic challenges, including higher mortgage costs and shop prices, as governments grapple with reducing euro-zone borrowings.
In summary, the economic resurgence may not be sufficient to sway political fortunes in 2024, as European leaders navigate a complex landscape of economic uncertainties and populist movements.
