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Article18 Oct 2021

Europe’s Shifting Leadership Spells Uncertainty

Europe is slowly emerging into a post-pandemic world, but the continent still faces a period of political uncertainty around who will lead in the coming years, and how. In a new report, Citi Research’s Giada Giana lays out some potential paths forward.

The dust has not settled on the German election, France’s election in April offers up a variety of candidates. In addition, Italy’s local election could set the clock ticking for political change. Here’s a closer look at the constraints on Germany’s next Chancellor, the political capital of France’s leadership and the scenarios for Mario Draghi’s future.

Germany: More Ambition, Less Clout

Following the election, the social democrat Olaf Scholz is in pole position to succeed Angela Merkel as chancellor. His economic and European policy ambitions are arguably greater than those of his predecessor, but Citi analysts say his coalition will be less stable, the debt brake even more binding and that an upper house majority is unlikely.

Germany – Polling and Election Result (%)

Germany – 2021-25 Bundestag Seat Distribution (Seats)

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Source: Citi Research, Wahlrecht.de

Source: Citi Research, Bundeswahlleiter


France:Greater Political Fragmentation and Room for Surprises  


With about six months to the first round of the Presidential elections on 10 April, investor interest in the outcome is rising. The Citi reports questions if there could be a premium for interesting candidates and if the re-composition of the political landscape could spring a surprise, giving President Macron another challenger than RN’s Marine Le Pen. Ultimately, however, in the absence of a (preferable strong and stable) majority in the lower house, there is likely very little that a newly-elected President can do, the report said.


France: Themes likely to matter the most when choosing your candidate in 2022, Number of responses

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Source: Elabe and Citi Research



Italy: Watching Draghi


The debate about Draghi leaving his PM job to be elected President in early 2022 has already started. Under most scenarios, snap elections next year remain unlikely in Citi’s view, but not impossible. Political volatility will likely resume, but a major U-turn relative to Draghi’s policy direction is unlikely.


Italy: Voting Intentions for Main Political Parties (%)

Lega, FdI and Forza Italia represent the centre-right bloc

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Source: Citi Research, various pollsters

Amid this leadership uncertainty, the fallout from Brexit continues, strengthening the theme of a continent in flux.  Couple that with continent wide efforts to kick start economies still coming to grips with the full impact of the pandemic, and it looks like the one certainty over the next few months will be uncertainty.

For more information on this subject, please see European Economics Weekly - Who Will Lead Europe? First published on October 1st.

Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.



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