Allianz Pulse 2024 – what unites & separates the demos of Europe; 3 electoral moments – UK, Mexico, South Africa

Super election year 2024 continues and reminds us that voting is how we participate in a civic society. A large part of our annual pulse checking (this year’s Allianz Pulse is its 6th edition), reverts around the unifying and separating aspects across the demos of Europe ahead of the elections next week. We asked 6,000 people in the large member countries about their views on political and economic issues, and their outlook for the future. The outcome of the European elections will reveal how the divisions and concerns are perceived and the challenges the next EU Commission will be faced with in order to lift the image of the EU. In our What to Watch publication we look at the economic consequences of three upcoming electoral moments: The general elections in the UK on July 4, 2024, that could bring back the Labour party after 14 years of Tory rule. The elections in Mexico this upcoming weekend that will see an incoming female president, her fiscal and trade policies under particular scrutiny. While elections in Mexico are expected to result in policy continuity, South Africa is experiencing a rising political fragmentation with the ANC poised to form a coalition government for the first time they came to power in 1994.

Allianz Pulse 2024: What unites and separates the demos of Europe

The complete survey findings here.

Thanks for reading Ludonomics! Subscribe for free to receive new posts and support my work.

Ahead of the decisive elections on 6-9 June, the 6th edition of our Allianz Pulse survey finds huge divisions in views of the EU. We asked 6,000 people in the large member countries Germany, France, Italy, Spain, and Poland, as well as Austria, about their views on political and economic issues, and their outlook for the future. We found that only the Spanish (net percentage: +25.8%) and Austrian (+21.5%) respondents seem happy to be part of the EU. In Germany (which used to be “pro-European”), Italy and Austria, the opinions are almost evenly split, while French respondents remain firmly “anti-European” (-22.3%).

Inflation and the cost of living, jobs and the economy and healthcare are the most pressing concerns. By far the most important topic is economic growth (50.5% of the total sample); it is the number one issue in all countries, except Austria. Indeed, most respondents are gloomy about the economy, albeit to different degrees. While French (net percentage1: -45%) and latterly also German (-32.3%) respondents are very pessimistic about the current economic situation, Polish respondents are by far the most optimistic ones, though pessimists still dominate (-2.8%). In Italy, thanks to better economic performance in recent years, the sentiment has improved, though it remains rather gloomy (-17.6%). The inequality issue ranks as a distant second (37.4%), followed by the education system (33.5%). But the green transformation still hardly matters for most respondents (20.2%), and another favorite topic in Brussels – common debt – also fails to catch respondents’ interest: only 16.5% of them deem it important.

The EU’s green targets remain contentious. There are almost as many respondents who see them as not ambitious enough (20.0%) as respondents who think the opposite (26.3%). 25.8% agree with the targets, but 17.8% also dismiss them as impractical or “nonsense” (and 10.4% have no clue). Furthermore, the “anti-green” camp is on the rise among the older respondents. This has widened the generational divide in this topic.

We also find different stages of polarization across Europe. We find that in both Germany and Austria, 81% of the respondents self-reported to be in the center of the political spectrum (center, center-right and center-left). The respondents gravitating towards the center were less numerous in Italy (67%), Poland (62%), and Spain (57%), with the lowest share in France at only 49%.

When it comes to picking a side in an increasingly fragmented global order, there is a general consensus: the notion of a sovereign and open Europe. Less than 30% of respondents think that the EU should align itself with one of the emerging blocks, with 20.4% for the US and 7.9% for China. The overwhelming majority would like to see the continuation of the status quo – or even the emergence of Europe as a “third” independent power, keeping an equidistance from China and the US.

Beyond geopolitics, European respondents are also concerned about generative artificial intelligence pushing up inequality. The mass deployment of GenAI will undoubtedly have an impact on the economy, jobs, and our personal lives. The lower the income of our respondents, the more likely they were to consider the potential impacts to be negative. Younger respondents were also more likely to consider AI as a job killer.

Despite the divisions and concerns, Europe is not lost. The majority of respondents can rally behind one “simple” goal: economic growth. If the next EU Commission listens and streamlines its several initiatives and programs towards growth it might become quite successful, lifting the image of the EU in the process.

The complete survey findings here.

What to Watch this week

You’ll find all the stories here.

UK elections: What would a return to Labour mean for the economy? The general elections on 04 July could bring back the Labour party after 14 years of Tory rule. We expect that under such a scenario, pragmatism and fiscal discipline should take precedence over higher public investments. In other words, based on electoral pledges, the Labour government is expected to increase green investments by around GBP5bn in (five times less than initially planned) and additional NHS spending by GBP1.1bn, leading together with other measures to a modest additional fiscal consolidation of GBP20bn (0.7% of GDP) by 2028. However, should they decide to revert to their initial program, the fiscal shortfall could rise to 3% of GDP, needing more than GBP70bn in fiscal consolidation. Stepped up plans to control immigration and implement further labour protections could take growth to a trough of +0.7% in 2026, less than half of what it would have been under the baseline scenario, while inflation would stay above 3% as the sterling would depreciate by -7% to -10%.

Mexico elections: Fiscal and trade policies under scrutiny. The 02 June general elections are expected to result in policy continuity, with Claudia Sheinbaum poised to succeed President López Obrador. However, markets will scrutinize two main risks. First, the upcoming fiscal and budgetary plans as the primary deficit increased to -1.1% of GDP. The central bank is likely to proceed with a modest reduction in interest rates in H2 (-50bps to 10.5%) as inflation remains slightly above the 4% target. Public debt stands at 53% of GDP, with risks of rising by +5pps this year due to Pemex's financial strain and increased social spending. Second, the US political landscape after the November Presidential elections will be crucial for its knock-on effects on Mexico’s economy. While Mexico is likely to be spared from punitive US tariff measures, the economy would suffer from the second[1]round effects of a trade war between the US and China/the EU with GDP growth cut by - 0.3pp after two years and exports by -1.4pp.

South Africa elections: Rising political fragmentation. The African National Congress (ANC) will need to form a coalition to govern for the first time in 30 years. This fragmentation is likely to increase public debt servicing costs from an already high 5% of GDP. The policy rate has remained 2-3pps over inflation for a year now, shielding the ZAR against excessive volatility. We expect the policy rate to decrease by -50bps by year-end to 7.75%. While the primary fiscal balance is slightly in surplus since 2023, the political fragmentation will limit the strength of future public spending increases, notably as the net gold and foreign exchange contingency account is estimated at +2% of GDP. Overall, we expect GDP growth at +1.4% in 2024, mainly driven by the rebound in global trade.

You’ll find all the stories here.