Will the Dutch vote in a Euroskeptic candidate on Wednesday (March 15th) that will push the Netherlands out of the Eurozone (Nexit)? Is the tide of populism in Europe rising?
As we discuss below, the Netherlands making an immediate exit from the Eurozone appears improbable; however, we believe the vote will be an important barometer for Europe’s political pulse, and help shed light on a couple key questions:
- Was the Brexit vote a one-off?
- How are the French likely to vote on April 23rd and in the runoff vote on May 7th, and then how will the Germans vote in September?
Who To Watch in the Dutch Election?
There are two main figures and parties in the Dutch Election to pay attention to:
- Geert Wilders of the Dutch Freedom Party (PVV)
- Current Prime Minister Mark Rutte of the People’s Party for Freedom and Democracy (VVD) aka Liberals
Geert Wilders has garnered the most headlines, campaigning on an anti-Islam platform behind his openly xenophobic views (incidentally he has had a private security team for over a decade and has received countless death threats). Central to his campaign is a pledge to remove the Netherlands from the Eurozone.
Mark Rutte has been Prime Minister since 2010, and leads a coalition between his Liberals and the Labor Party (PvdA). Viewed as more of a centrist, Rutte has worked hard to build a coalition government, however some may argue one with its hands’ tied. Under Rutte’s watch, arguably the country has witnessed increasing waves of nationalism, in part, as response to the war in Syria that increased immigration patterns to Western Europe, including Holland. Recently Rutte highlighted March 15th as an oppotunity for the Dutch to send a signal to the world that it’s possible to “stop the trend” of rising populism sweeping western democracies.
(Wilders on the left, PM Rutte on the right)
Poll Results Thus Far
While Wilders’ most recent poll numbers would equate to around 25 seats in parliamentary, his support is far from the 76 seats needed to gain a parliament majority (150 seats total). As the poll directly below from Peil.nl shows, Wilders lost 4 seats to 25 week over week (March 3 vs February 26).
In the same week over week period, Rutte lost 1 seat to 24.
For context, the second chart below shows that over the last three months Wilders’ support has waned from over 35 seats, whereas Rutte has held a much steadier polling course.
But can polls be trusted?
What We Learned From Brexit and Trump’s Victory?
- Don’t count any candidate out
- Polls are not reliable at forecasting winners
While that may be too over-simplified for some, it’s true we’re not suggesting that Wilders can’t win big. But in the modern era, no single Dutch political party has captured a majority government. So a majoirty is possible, if unlikely this time around, but if it were to happen for Wilders and the PVV, much like the Brexit vote in the UK, there would likely be a series of votes by the Dutch people to decide their fate in the Eurozone.
Specific to the polling, and given Wilders’ views on race and religion, it comes as no surprise that pollsters (and voters on Wednesday) may have been shy to indicate their true candidate loyalty until they hit the privacy of the voting booth (sound familiar?).
Coalition Build
However, even if Wilders should outperform his current poll numbers, most mainstream parties have ruled out forming a coalition with his party (PVV).
A more likely outcome appears to be one in which PM Rutte wins the most seats, but remains short of a majority. His ability to form a viable coalition will determine whether Holland will have to go to the voting booth again to capture a majority government.
Hedgeye’s Outlook
Taken together, we’re seeing clear signs that a populist tone of “we’ll do it ourselves”( = ex EU and Eurozone) is prevailing across the region. But just how loud and impactful this voice is is still not completely understood. The Dutch election will be a key barometer.
More broadly from an investment standpoint, we see the fracturing and fragmentation of the Eurozone and EU projects leading to further downside in the common currency (EURO). We’ve been loud across our research platform recommending to short the EUR vs the USD via the eft FXE. And should a major country like France leave the Eurozone, we'd expect the bottom to fall out in the common currency. (see our trading levels in the chart directly below)
While we haven’t taken a constructive view on Dutch markets YTD, below, for reference, we include charts on Dutch GDP and CPI -- for both our estimates come in higher versus consensus in 2017.
