In the wake of the European Parliamentary elections last month, the rise of “eurosceptic” and hard-line nationalist parties has been the main headline in the press across Europe. While the shift is significant, reports of the European Union’s demise appear premature, if not exaggerated. As Europe seeks a way forward, private equity is a much-needed engine for growth, innovation and employment.
The UK and France were at the forefront of the populist move, with UKIP and Front National making significant gains to secure a quarter or more of their domestic votes. The support the parties received has propelled them into mainstream politics and led to soul-searching by more established parties who fear they may have lost touch with the electorate. The trend is not limited to those two member states, with significant backing for eurosceptics in Germany, Greece and Spain amongst others.
There is no precise definition of a “eurosceptic” party, but at Invest Europe we estimate around 150 MEPs (out of 751) in the new Parliament represent parties that are explicitly hostile to the EU. Other mainstream parties have expressed serious reservations about the EU’s direction of travel, such as the British Conservatives, though remain a constructive influence in the parliament and European politics.
But the vast majority of MEPs represent parties are firmly committed to the European Union. Some 550 representatives want to work within its framework, which puts the balance of power overwhelmingly in the hands of those who are “pro-Europe”.
That said it is absolutely clear that voters are frustrated with the EU. They see it as a highly complex structure, run by policymakers who often fail to explain properly how we all benefit from the union. And although the EU has many Presidents, there is unfortunately no figurehead to present a positive vision for Europe. While EU and national politicians have struggled with structural reform and austerity, eurosceptics have stolen the show with a simple story linking immigration and unemployment.
Tackling issues that worry voters – not just immigration, but economic growth and delivering prosperity to ordinary Europeans – is the key challenge over the next 5 years.
Still, on a very practical basis, the European parliament will look, feel and act differently than before. The centre-right EPP has lost much of its lead, and its closest allies have lost seats too. On the other side, the centre-left S&D is in no position to claim victory and would struggle to reach a majority even with the support of other left-leaning groups, like the Greens.
The conditions are therefore right for the EU equivalent of a ‘grand coalition’, with the EPP and S&D working together to ensure that legislative business gets done and that the EU project is not knocked off course. In many ways this will be a continuation of the status quo as the main groups have often found consensus and packages of amendments both could support. The difference now is that both have to work together.
As Europe looks for a political way forward, and the economic outlook brightens across much of the continent, MEPs of all parties realise that Europe needs a further push for sustainable growth and innovation. Private equity plays a role here. The industry has been hard at work in Europe throughout the crisis – almost 25,000 European companies have received fresh backing from private equity since 2007. The industry has an impressive track record in identifying the “champions of tomorrow”, and then taking those companies to the next level. The private equity industry is firmly committed to Europe and will continue to invest here.