EU elections kick off against a backdrop of China disputes, ‘greenlash’ and possible Trump return

Belgian Foreign minister Hadja Lahbib poses with a European flag in a mock polling station box to encourage people to vote in the upcoming European Elections.

Laurie Dieffembacq | Afp | Getty Images

The political makeup of the European Union is about to change with voters across the 27 member states heading to the polls from Thursday until Sunday.

With growing support for far-right parties, analysts expect a more protectionist policies from the bloc, with fewer climate targets and more spending on defense.

CNBC takes a look at why this election matters for Europe and the rest of the world.

Relations with the U.S.

But regardless of what happens, the EU has learned an important lesson: It might not be able to rely on the U.S. for defense in the future. Trump has previously remarked that he would not protect NATO countries from Russian attacks if they lag on their membership payments. In addition, U.S. lawmakers took several months to approve new financial aid for Ukraine, raising questions about their long-term commitment to the cause.

As such, the next policymakers in the EU are expected to increase spending and work more closely with themselves on defense matters.

Relations with China

The European Commission, the executive arm of the EU, is expected to announce new tariffs on Chinese EVs just days after the election takes place.

The EU has been walking a tightrope regarding its links with China.

One the one hand, Brussels recognizes Beijing as a strategic rival, but at the same time, it wants to keep cooperation on climate matters and geopolitical issues.

Green pledges

In the wake of the 2019 EU elections, the bloc claimed it was the global champion on a climate-friendly agenda. However with more climate-skeptic politicians due to arrive in Brussels, expectations are that the bloc will ease some of these previous ambitions.

“The shift to the right in the EU Parliament would only facilitate a slowing down of further environmental legislation and potentially even the watering down of existing agreements such as phasing out conventional cars by 2035,” analysts at Citi said in a research note in late May.

“This could include more support for nuclear power or even support fracking for cheaper and more reliable gas,” they added.

Giorgia Meloni, Italy’s prime minister, during a Brothers of Italy party final election campaign rally ahead of the European elections in Rome, Italy, on Saturday, June 1, 2024.

Bloomberg | Bloomberg | Getty Images

Ukraine’s future

No reason Europe should lag global equities, Quintet CIO says

Citi analysts also said that with Ukraine potentially joining the EU, there could be a “large shift in net contributions,” which would likely upset countries that are currently net receivers from the EU budget.

“An even larger Eurosceptic representation is also likely to weigh against bold reforms which could make enlargement difficult,” the analysts said.

‘It’s the economy’

A European-wide survey showed in March that citizens see the economy, social justice and jobs as the most important dimensions for the future of Europe.

This is particularly important at a time when the bloc is still recovering from an inflation crisis that dominated most of 2023.

Goldman Sachs said in a research note in May that the EU faces three structural issues: A deteriorating demographic outlook, a weak industrial investment in comparison with the United States, and low productivity growth.

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