From 6-9 June, over 400 million voters in 27 countries will decide the composition of the European Union’s 720-member parliament, setting the stage for potentially significant political shifts that could challenge legislation, and contribute to changes in the region’s commercial landscape.
The European Commission, Parliament and the Council of the EU are central to the legislative process. While the Council sets the political agenda and priorities, the Commission – an executive body – is responsible for proposing legislation, implementing decisions, and upholding the union’s treaties. The parliament, directly elected by EU citizens and comprising seven major blocs, amends, approves, or rejects proposed policies, with members generally belonging to a bloc based on their agenda and political leanings.
Polls indicate that the centre-right European People’s Party (EPP) will remain the largest group in parliament. However, alongside declining support for left-leaning parties, an anticipated increase in far-right and populist representation within groups like the right-wing Identity and Democracy (ID), and the Eurosceptic European Conservatives and Reformists (ECR), could challenge the traditional centrism typical of EU governance. Given significant fragmentation among right-wing parties, the potential for legislative changes or delays from a less unified parliament cannot be discounted – especially across issues of concern to voters and investors, like energy, defence and immigration.
Energy transition ambitions to face resistance
Following the 2019 EU Parliament election, the EU pursued stricter energy and climate-related initiatives to strengthen energy security and accelerate the transition to renewables. Commission President Ursula von der Leyen’s flagship Green Deal committed the EU to becoming the first net-zero continent by 2050, and mobilised a raft of proposals to revise and create laws targeting emission reduction efforts. For example, the 2021 Fit for 55 Package pledged that the EU would achieve a 55 percent reduction in greenhouse gas emissions by 2030 through laws including the revised Renewable Energy and Emissions Trading System directives, and a new Carbon Border Adjustment Mechanism.
Most proposals have now been agreed and are in the process of being adopted at the national level. However, following elections, some legislation will need to be reviewed and groups including hard-right climate sceptics and agrarian parties could use this as an opportunity to push back on contentious targets, such as the 100 percent emission reduction target for passenger cars and light commercial vehicles from 2035, and the EU’s 90 percent interim emissions reduction target for 2040. There is also likely to be little incentive to support or deliberate Carbon Capture, Utilisation and Storage (CCUS) legislation given the political sensitivities around higher carbon prices and funding expensive CCUS technologies amid rising living costs across the EU.
With the newly formed parliament likely to prioritise immediate issues confronting the EU, such as rising cost-of-living and an increasingly unstable geopolitical environment, energy-related legislation is likely to take a back seat, driving uncertainty around the EU’s commitment towards the energy transition. The added potential lack of consensus around the EU’s energy legislation, paired with watering down of proposed legislation, further risks undermining the progress of investment in green businesses required to achieve the EU’s net-zero ambitions and unlock new sources of growth.
Forging an independent defence strategy
Security was not a top priority within the EU’s legislative landscape after the 2019 elections, when policymakers were primarily focused on strategic alignment with NATO and initiatives like the European Defence Fund (EDF). The situation changed in response to Russia’s 2022 invasion of Ukraine, which heightened perceptions of external threats and significantly altered public and political discourse on defence. Defence and security quickly surged to the forefront of the EU agenda, evidenced by several recent polls showing that EU citizens now prioritise these issues alongside the economy and public health. This heightened awareness is particularly pronounced in Baltic and Nordic countries near Russia. Even in EU countries not directly bordering Russia, there is an increasing wariness of Russia’s suspected destabilisation efforts witnessed across several European countries using disinformation campaigns, cyber operations, political interference, and sabotage.
In the upcoming legislative term, EPP and S&D legislators will likely seek to re-evaluate and potentially recalibrate defence legislation to better address these concerns. Proposed changes may include increased funding for defence to bolster military readiness, initiatives aimed at enhancing the EU’s strategic autonomy to reduce dependency on external allies, and an expansion in collaborative defence projects funded by initiatives such as the EDF. However, passing such legislation may prove to be difficult due to opposition from members with pro-Russian sympathies. In recent weeks, candidates in several countries including Austria, Germany, Hungary, and Italy campaigned for ‘peace’ in Ukraine in what many see as an attempt to soften the EU’s stance towards Russian aggression in Ukraine.
For commercial players in the defence sector, a legislative shift towards greater defence spending represents both opportunities and challenges. The potential increase in defence budgets and expansion of EU-wide defence projects could open new markets for defence equipment and services. However, companies must also prepare to navigate new regulatory landscapes and adjust to evolving procurement policies. Strategic partnerships within the EU may become crucial as firms seek to align with the new directives and capitalise on the emerging opportunities presented by a redefined European defence policy.
Immigration to remain a tool in the far-right arsenal
Driven by ongoing instability in North Africa and Ukraine, irregular migration remains a contentious theme in EU politics. Legislation since 2015 has been piecemeal, but in April and May 2024, after nearly a decade of deliberation, the EU Parliament and Council accepted the Pact on Migration and Asylum to standardise and expedite migrant processing protocols, and distribute costs and responsibilities among states. With the pact barely passing, opposition persists among left- and right-wing factions, with the former pointing to potential humanitarian consequences, and the latter arguing the legislation does little to address issues of border insecurity, the strain on welfare systems, and a loss of national identity. Nevertheless, full implementation is scheduled for 2026.
While these reforms are unlikely to directly impact the commercial space, opposition to the pact and its implementation in the coming two years will drive friction in parliament, which may delay cooperation on important legislation in other contentious areas like defence and energy. Some leaders, like Poland’s Donald Tusk and Hungary’s Viktor Orbán, have already rejected the Pact, prompting EU authorities to threaten penalties. As right-wing and far-right representation, and ‘fortress Europe’ rhetoric becomes more normalised on the EU stage, parties like Alternative for Germany (AfD) will continue leveraging anti-immigrant sentiment (and the EU’s role in obligating states to accept responsibility for migrants) to increase their domestic foothold. With several right-wing governments already in power across Europe, and others gaining traction, wider support for these parties and their often nationalist agendas could translate into stricter domestic anti-immigrant laws that may exacerbate Europe’s labour shortages amid an aging population. Some commercial operators – including in-demand and labour-intensive technology and manufacturing sectors in the Netherlands and Germany – have already indicated concern over the potential for far-right anti-immigration legislation to drive issues around labour availability. Meanwhile, societal tensions have also stoked unrest and violence in countries like Sweden and Germany as far-right and counter-protesters clash at demonstrations, which could intensify as anti-immigration rhetoric becomes more mainstream.
Given these dynamics, businesses could face an even more volatile and divided political landscape, and possible longer-term challenges in sectors typically reliant on foreign workers, like tourism, agriculture, and manufacturing.
Potential for a political shake-up?
While the likely increase in seats for the right-wing ID and ECR blocs (to an estimated 25 percent) has generated concern of disruptions to European unity, policies, and the wider liberal agenda, these groups – comprising a spectrum of right-leaning agendas – remain highly fragmented on supranational policies, including irregular migration, defence and energy. As such, EU policymaking in the aftermath of the election will be characterised largely by continuity, perhaps with a greater degree of infighting among factions, and challenges in compelling some member states with right-wing governments to comply with existing frameworks. However, populism and nationalism are rising, driving longer-term implications for the composition of national governments and the EU’s legislative makeup. In time, it is feasible that alignment among right and far-right factions could increase and present a much stronger coalition that could effectively disrupt the EU’s longstanding vision of unity, and its traditional policies.
