Analysis-Economics scaring voters ahead of EU elections

Michael Ross, Maria Martinez and Mark John

DUNKIRK, France (Reuters) – The northern French port of Dunkirk, riding an industrial mini-boom thanks to a government-backed investment drive, is an example of President Emmanuel Macron’s belief that fighting unemployment is the best way to fight unemployment. – OK.

But locals like Gilliams Pierron can’t stop supporting Marine Le Pen’s nationalists in June’s elections to the European Parliament after two new EV „gigafactories” cost the economy power, food, heating and other essential goods.

„Bread, cheese, butter, it’s all gone up,” construction worker Pierron told Reuters as he traveled on one of the region’s free buses, listing the ingredients of a ham-and-cheese baguette roll, which he said cost 4.40 euros ($4.75). After three years of high inflation.

„At some point you have to start thinking about the French before others,” he said, arguing that Macron should prioritize domestic issues such as affordable housing rather than continuing support for Ukraine in its war against Russia.

Anger about falling living standards is shared by millions of Europeans and is expected to erode support for the main parties in a June 6-9 vote for the 720 lawmakers of the EU legislature, which helps set trade, green and other policies in the 27 countries. Vol

Since the last elections in 2019, the European economy has faced a COVID-19 shutdown and a cost-of-living crisis, fueled by global inflation and worsened by energy price hikes brought on by the war in Ukraine.

Massive government support for households and businesses has helped avert a deep recession, but as in the US, strong economic data has not helped President Joe Biden’s bid for a new term – Europe’s incumbents will have little to thank for that.

„It’s extraordinary how Europe has held it together through these enormous shocks,” said Jerome Zettelmayer, director of the Brussels-based Bruegel Institute of Economics.

„But this story of regression is not something that makes you very hopeful … there is a sense of relative decline.”

The risk of poverty increases

Currently, the main parties that dominate both the European Parliament and most national governments broadly share a vision of an economy open to trade with the world while moving forward with a net-zero green transition.

But that consensus is at risk, and Europeans are deciding the economic status quo isn’t working for them.

Last year, European output managed to grow a modest 0.5% with unemployment at a historic low of 6.5%. But digging deeper, the data shows how millions of Europeans – including those with jobs – are struggling with dwindling finances.

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With inflation reaching nearly 11% in 2022, wages have failed to keep up. As a result, the average European household saw its disposable income fall by 2% year-on-year, with low-income groups hit hardest, EU data shows.

This reduced the share of those ranked by the EU as „at risk of poverty or social exclusion” to 21.6%, a rise of 0.5% point from 2019, equivalent to 2.9 million people – the first increase in the category after a decade – year-on-year fall.

According to an annual survey by German insurer R+V, the top three worries of Germans are now tied to financial matters: high living costs, unaffordable housing and fears of government cuts in social welfare.

„They are now worried about whether they can still make ends meet with the money they have,” said Isabelle Borucki, a politics professor at Germany’s Philipps-Universitaet Marburg.

Variations of this are seen across Europe: in Spain, many homeowners are on variable-rate mortgages, exposing them to higher interest rates. In Poland, the Credit Information Office (BIK) said „uncertainty and tension” are putting Poles away from saving.

In a continent that still tops global rankings for living standards, three-quarters of Europeans say their quality of life will worsen and a third have trouble paying bills, the EU’s regular „Eurobarometer” survey shows.

In particular, recent protests by European farmers against EU green rules and free trade have resonated with some voters. Although surveys show that most Europeans support climate change action, many are concerned about the cost of doing so.

Credibility is an issue

How it reshapes the 27-nation EU legislature will ultimately depend on local politics and other factors, including what coalitions are formed after the referendum.

Pollster Ipsos finds mainstream parties of the right and left leading in 16 countries. However, far-right groups are also seeing gains to control a fifth of EU parliamentary seats, with economic discontent a factor in those gains.

„It doesn’t explain the rise of right-wing populism, which is a factor that still helps them,” said Ipsos account director Mathieu Gallard, adding that rising living costs emboldened voters who already supported nativist far-right parties. Identity Agenda.

Such is the case in France, where polls show Le Pen’s Rallye Nationale (RN) beating Macron’s Renaissance Party by more than 14 points in 2019.

Elsewhere, the far-right’s lack of experience in running economies limits their credibility and therefore their appeal – in Germany, for example, local conservatives hope to see the Alternative for Germany (AfD) out.

Much attention will be focused on Giorgia Meloni’s Brothers of Italy, which since taking national power in 2022 has massaged the economic well-being of Italians with state handouts, including home improvement subsidies and heating subsidies.

With many Italians blindsided by the EU referendum, all the new debt – the highest in the EU – only adds to Italy’s already high debt mountain.

Giorgio Di Rita of Sensis, an Italian socio-economic research organization, warned that the „return to reality” in state finances could be sudden, but admitted: „Right now, what Giorgia Meloni is telling voters is in line with their emotional state.”

(Additional reporting by Karol Badohal in Warsaw; Giselta Vagnoni in Rome; Belen Carreno in Madrid; Graphics by Griba Jayaram; Writing by Mark John; Editing by Susan Fenton)