European Parliament Election 2024: U.S. Business Impact

Europeans went to the polls June 6-9 to elect 720 members of the European Parliament (EP). What we know for sure: 1) Far-right parties gained seats at the expense of the Greens and the centrist Renew Europe faction; and 2) European policymaking just got more complicated, creating more uncertainty for business.

First, a level set: Polls in Europe are no more predictive than they are in the U.S. While accurate in predicting the rightward shift and losses for the Greens and Renew, polls largely overestimated gains by the far-right. True, they gained more seats, especially in Germany and France, but they didn’t prevail everywhere—and the center-right European Peoples Party (EPP) actually won additional seats.

The far-right parties are internally disorganized, which will also dilute their impact on policymaking. Despite the undisputed rise of nationalism, populism, protectionism, xenophobia, and Euro-skepticism, the center held in several key countries, which, on balance, is good for business.  

Key Takeaways

• Increased fragmentation will complicate policymaking. The EPP remains the largest political grouping. Together with the center-left Social Democrats (S&D) and Renew (even in its diminished state), they will continue to drive the EP agenda. But these blocs aren’t monoliths, and differences among them mean that the EPP will need to find additional coalition partners on a case-by-case basis—potentially including among the far-right factions—and this will slow things down. It also bears noting that there are 100+ newly elected MEPs who’ve not yet declared alignment with a political family, so the final numbers are actually still in flux.   
• There are also several implications for Commission leadership. In addition to a nod from EU heads of state, Ursula von der Leyen needs a majority of MEPs to support her bid for a second term as president of the European Commission. Increased fragmentation means she’ll have to court a broader array of players to secure her position. The deals she cuts to secure votes will affect aspects of her policy agenda, and this could go either way for business.   
• Many Europeans are more focused on the U.S. elections—regardless of who wins—than on the impacts of these EP elections. The EU will continue to attach a very high premium to strong transatlantic relations— not least given our $8.7 trillion commercial relationship, which remains the world’s largest—but beefing up Europe’s strategic autonomy will remain a driving imperative. We’ll likely see this in key areas, including clean energy, advanced technologies, and defense—potentially at the expense of American companies.  

Policy Implications

Increased fragmentation makes early policy predictions tougher than before. That said, even as we await EP committee (and Commission assignments) to assess how specific policies are likely to shape up, certain directions seem clear: 

• Bolstering European competitiveness is at the heart of the strategic autonomy mantra. Two reports by former Italian prime ministers will shape the conversation: Enrico Letta’s April recommendations on measures to strengthen the Single Market and Mario Draghi’s imminent report on competitiveness. Together, they will inform critical decisions on the balance of carrots and sticks the EU uses to improve its global position. Improving the attractiveness of European capital markets to drive innovation is but one example of likely steps to improve Europe’s standing. Additional nationalist and Euro-skeptic voices in the EP likely will mean greater pushback to measures that might cede more control to Brussels, especially on fiscal integration. Above all, the challenge will be ensuring any policy proposals don’t come at American companies’ expense.  
• In theory, there is a growing appreciation of business concerns about overregulation. How that will be reflected in actual policymaking is an open question, however. In the case of climate and energy policy, for example, Europe’s drive to lead the world on sustainability generated a raft of heavy-handed new regulations in recent years, including unrealistic reporting requirements and emissions targets. In these recent elections, far-right parties leveraged public frustration with the pace of change required by these measuresto their advantage. Right-leaning MEPs are likely to prioritize economic growth and energy security over more aggressive climate action. Europe’s commitment to global leadership on sustainability will remain, but the agenda will be re-shaped to respond to some of these concerns.  
• During the last legislative cycle, the EU adopted key digital files. These files were billed asefforts to stimulate competition and innovation. In fact, several of these measures, such as the Digital Markets Act, discriminate against American companies. Other pending files run the risk of a similar protectionist tilt and will require more revision to mitigate adverse impacts.  
• Given the existential threat, even with the arrival of additional pro-Russian MEPs, the Parliament will remain united in support of Ukraine. That said, questions about the scope and scale of that support will be increasingly tough to answer with a more fragmented Parliament.  
• As is the case in their home countries, MEPs’ views on China varydepending on the extent of those ties. But there is an overall hardening of attitudes and more MEPs are likely to voice concerns about the impact of China’s anti-competitive practices. But practically speaking, the EU’s China policy is driven by the member states and mirrored through the Commission, not the European Parliament.