Elections and Trump change European landscape
The past couple of months have brought significant changes in Western Europe and in its relation with the United States. Before the French presidential election on April 23 and May 7, there were still many concerns prevalent that the European project could suffer a serious setback even more so that a British general election was to be held on June 9 at the initiative of the British prime minister who wanted a clear vote in favor of a “hard Brexit”. By end of May, at the NATO summit in Brussels, there were also apparent tentatives by the American president to drive a wedge into the ranks of the members of the European Union.
Pro-European candidate wins
Different from the expectations in some corners, things turned out quite differently. First, in France, Emmanuel Macron won the presidential election. He is an outspoken supporter of the European Union. Macron’s victory against Marine Le Pen gives him a clear mandate to move ahead with a deepening of the European Union. Secondly, the US-American president has inadvertently strengthened European unity and induced the German Chancellor Angela Merkel to call for deeper European cooperation because the United States could no longer be seen as a “reliable partner”. Thirdly, the UK general election has not led to a larger majority of Prime Minister May’s Conservative Party, but to a loss of seats.
Britain’s Conservative Party suffers losses in general election
The big winner of the UK’s general election was the Labour Party, which gained 32 new seats while the Conservatives lost 13 seats. Instead of having a strong majority, as it was expected, the Conservative Party must now line up with the Democratic Unionist Party in order to hold a slight parliamentary majority. Instead of a “hard Brexit”, which Theresa May had promised, the negotiations about the conditions of Britain’s departure from the European Union will now have to settle for a “soft Brexit” which means that the residential rights of EU citizens will remain intact. As to the economic consequences of Brexit, recessions and higher inflation loom in the UK, while the rest of the European Union reported rising business confidence, low inflation and higher growth prospects.
Improving economic conditions in Europe
In June, the Economic Sentiment Indicator (ESI) increased strongly in the euro zone by almost two points to 111.1and for the whole of the European Union by 1.6 points to 111.3. These numbers reached the highest level since August 2007 before the global financial crisis.
By early 2017, economic growth rates of the Euro zone reached 1.9 percent on annual basis. With 1.3 percent, the inflation rate is getting closer to the target rate of the European Central Bank (ECB), which still sets its policy interest rate at zero percent as the ECB also continues with its expansion of its balance sheet.