Dutch election polls point to a tightening between VVD & PVV – MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that the first big test of 2017 on whether the populism evident with Trump’s victory and the Brexit vote has spread to Europe comes in two weeks’ time with the general election in the Netherlands.

Key Quotes

“With this event fast approaching it was notable to see the latest opinion poll results from yesterday indicating a decline in support for Gert Wilders and the Freedom Party (PVV) at the expense of PM Rutte’s Liberal Party (VVD). In an EenVandaag poll published yesterday both parties were predicted to take 22 seats, the first time there has been a tie in that particular poll since June 2015. A separate poll (Kantar Public) has the Freedom Party unchanged at 28 seats and the Liberal Party on 27 seats, up 2 seats from previously.”

“There are at least 12 parties that are expected to take seats in the 150-seat parliament and on the showing in yesterday’s opinion poll a coalition circumventing the Freedom Party could be done more easily. However, at closer to 30 seats or certainly over 30 seats, the influence of the Freedom Party would be much greater. A simple majority of 76 is required for smooth passage of legislation through parliament and the greater the Freedom Party’s seat count is the more difficult it becomes for a workable coalition to be formed without PVV inclusion.”

“Furthermore, while the latest opinion polls may point to a loss of momentum for the Freedom Party that would be good news for the political establishment and for the euro, we should not assume that no damage is being done. Immigration has dominated election campaigning and in efforts to weaken the Freedom Party, centre to left-leaning parties have shifted to the right. The Christian Democrats and Labor have both called for border controls to halt new arrivals.”

“There have been 24 opinion polls published on Wikipedia so far this year and based on those polls, PVV has averaged 28.8 seats while VVD has averaged 24.6 seats. In all but 5 of those polls, PVV has polled more seats than VVD. Hence, we suspect PVV would have to garner approaching 30 seats to trigger a negative fallout for the euro in the foreign exchange market. Anything closer to 20 seats for PVV and certainly a count that is less than VVD would fuel a relief rally for the euro. This would be as much related to what this might mean for France as what it might mean specifically for the Netherlands. The implications for the Netherlands might not be clear-cut for a period given it will likely take considerable time to form a coalition, but a poor showing for PVV would help reinforce the view that what happened in 2016 is not likely to be replicated in continental Europe in 2017.”