European elections leave markets jittery: What do far-right gains mean for EU?

Hello and welcome to People in Profit. I'm shout better coming up this week we'll start in the European Union to try and understand how the gains made by the far right, especially in France, could affect the continental blocks economy. And we'll peer into one of the world's leading robotics hubs in the town of Odense in Denmark and see why the Scandinavian country has made a name for itself the high tech space. And we'll understand why South Korea's cosmetics industry, also known as K beauty, his going global surfing on the success of other cultural exports like K pop and K drama. Well, a cloud of uncertainty is hovering over Europe this June in the wake of the EU Parliament elections. The institution's grouping of center right MPs, the European People's Party, has maintained its grip on power in the Strasbourg, but the gains of far right, often Euro, septic candidates is ringing alarm bells. Nowhere is this more evidence than in France, where the far right national rallies 15 point lead in the vote. Has pushed President Emmanuel Macron to call for a snap election later this month. The possibility of seeing the far right in power in the country has LED turmoil in the markets. Well, to better understand the economic impact of such a scenario as well as its likelihood, let's now speak to Maria Demeritz's senior fellow at Bruegel, a Brussels based economic think tank that specializes in European policy. Thank you so much for being with us. Thank you. So it's not just the euro weakening against the dollar. We also saw French sovereign bond yields rise in the wake of the vote, as well as the spread with German bonds. What would it mean for the EU as an economic bloc if France saw the far right come out on top of the upcoming legislative elections? So if that were to deteriorate in the context of having an electoral outcome, that is going to destabilize. The French government further, that would definitely be bad news for Europe. Neither France and certainly not Germany alone would not be able to defend European positions credibly in the global scene. And to couple with that, we will have political uncertainty, which is never good. And of course, the economics will be pushing spreads up. So on the whole, I think this is not good use for Europe. Let's focus on on the National Rally here in France for now. We've seen surveys showing that Jordan Bardela the the the the the parties, the president is actually becoming a more palatable figures for people who qualify as being executives, according to some some surveys. What do you make of that is, is the National Rally changing its its economic policies? It certainly is changing the way that it communicates about Europe. A few years ago the party would have been extremely Eurosceptic and even advocating that France would exit the EU. This is no longer the case. They have not been arguing that France would exit. They want to stay within the EU. But what they want to achieve by staying in the EU remains programmatic. In my view, it it seems like they would want to change. The EU from within in a in a way that becomes weaker and not stronger. So that I think in economic hands. On the other hand, the party is is actually one that advocates for much more interference with the economies. It wants a stronger subsidies for firms that are in trouble. It wants price interference and it wants to tax the wealth. So it leaves very much on the left side of the economic spectrum. And at the same time, France is dealing with a huge debt problem, 110% of GDPA, huge deficit problem, 5% of GDP. The National Rally has criticized the Macron government for its handling of public finances. But what would it look like if the National Rally came to power? Indeed. So, just to explain that, the European Commission is forecasting that France will have a debt this year, 2024 of 112%, but I think the important thing here to remember is that from September on we are returning to the functioning of what we call the European fiscal rules. This is a way of constraining the way that countries use their fiscal capacity. And that of course, means that any future government will have to comply with this French government and all other governments will have to comply with this fiscal rules. Given the level of the debt, what we estimate in a study that we've done at Brugal, you know, the next French government well, or the current one, we have to consolidate. By a rate of about between half and 1% of GDP per year. This is this is a big amount which effectively means that the French government doesn't have much room to spend now for a if it were to be a new government then which advocates that we should interfere more in the markets and actually subsidise firms, they will not have the space for that. And I think what we should be watching is how the rating agencies are going to interpret. A possibly new government coming from the far left of the far right. Rather I want to talk about the national rallies equivalent, but in Germany, Alternative for Germany, alternative for, for Deutschland. What's what's their vision for, for the economy and and the economy within the EU? Exactly. That's a very good question because on economic terms, these are very two different parties, as I said. In France, the National Rally is very much on the left side of economic policies. The FDP in Germany, on the other hand, is a lot more liberal. It wants much less interference from the state. It advocates for deregulation. So in terms of economic policies, they're extremely different. And that is why it's very difficult to imagine that they would be able to work together in economic policies in the context of Europe, in the context of the the European Parliament. They they're only similar positions. They have to do with immigration, have to do with being extreme country centric. But other than that they are very, very different in the way that they want to pursue economic policies. 11 Last question here, one of the major economic policies of the European Union in the last few years is that the European Green Deal, which has a very ambitious targets to transform the European economy into a carbon neutral economy. What would it mean for that project if these are far right parties consolidate their gains and let's say take power in France or or make more gains in Germany or elsewhere? I think that the news is not bad here. I remind you that the outcome in the European elections as it concerns the European Parliament, isn't very different to what we've had up till now. Yes, there is a small shift to the right, but in terms of the way that the European Parliament will govern, it's actually very similar to what we've had till now. So as far as Brussels is concerned, in my view, we're not going to see. A change of policies, I think policies will be continuing in the same speeds and intensity as they have done up till now. There is no room for for easing our policies when it comes to the Green Deal. But I do not see any reversals And of course the Green Deal is already law and certainly I do not see any reversals of this law. So in that respect, I do not think that the outcome of the elections. Concerning national outcomes, but also much more, the European level is necessary a threat to the Green Deal and indeed our our ambitious and achieving climate neutral policies. Maria Demeritz's senior fellow at Bruegel, a think tank based in Brussels. Thank you so much for sharing your insights as to what this picture would look like in in Europe. Well, Denmark has opened the world's the world's first ever cobot hub in its third largest city, Odense. It's quickly becoming a global leader in the robotics industry, but it's still having to stave off stiff competition from booming homegrown industries in China and the US. The Danish sector is now looking to AI to set it apart. Inca Oyitaida tells us exactly what cobots are in this report. It's the crown jewel of Denmark's booming robotics industry. Inside the newly opened joint headquarters for Universal Robots and Mir, the firm's latest collaborative robots are showing off their skills. The machines are designed to work alongside humans in order to boost productivity. This so-called cobot hub, located in Odense, is sealing Denmark's position as a world leader in robotics. It's a big milestone I would say for cobots in general, but a big milestone for Danish robotics. It's the first in the world, this cobalt hub. We as an ecosystem are capable of keeping our big industries within the country. The creation of the hub is largely thanks to a $36 million investment from robotics giant Teradyne. The American firm bought Universal Robots back in 2015 before subsequently purchasing Mir. Their cell triggered a wave of new robotics companies sprouting up across the country. Odence alone is home to more than 160 firms. That's just a fraction of the 600 robots, automation and drone companies in Denmark, a sector that grew by 9% last year. The country's newfound success will have to compete with traditional heavyweights the US and China. But the president of Universal Robots says the fierce competition is beneficial for the industry. It's kind of acknowledging that there is a real market out here and it's going to be bigger and there is a real need. We see it already, but a lot of new competition coming in. It's making it very obvious. Artificial intelligence could prop up Denmark's competitive edge. Universal Robots is now collaborating with industry giant Siemens and NVIDIA to integrate AI into its cobots. Well, the cosmetics sector has long been dominated by French companies, but there is stiff competition growing, notably from South Korea. In 2022, it overtook Germany to become the world's third biggest exporter of cosmetics, behind the United States. Admired for their quality. The array of South Korean products, or K beauty, is the latest addition to a Korean cultural wave that began with K pop and K drama. This report from Chloe Bonion and Justin Mccurry in Seoul. International buyers flock to Seoul for one of many cosmetics Expos held in the South Korean capital. The country's firm showcase their latest products, promotions that will supposedly give you perfect skin to pimple busting patches. We all know mascara, but this is a bristle free mascara. When I see some products in South Korea, they don't really surprise me. I just think it's South Korea. As head of a firm specialising in South Korean cosmetics, this French woman helps clients find what they're looking for. We don't necessarily find this type of concept in Europe or the US Customers are always looking for something new that they can find in their own country, and South Korea is known for its innovation. KBT is now targeting overseas markets, especially Africa, where the sector is expected to grow by 12% a year over the next three years. Especially for the African market, we have a million population. It's like a very potential market, so we made more a bit darker colours. We can cover the Middle East market and also the African market. As proof of its popularity overseas, the hashtag K Beauty can be found all over social media. Ada, a French influencer in Seoul, works with South Korean brands that want to reach out to overseas consumers. I feel there's a keen interest in K Beauty. Because compared to the other videos that I post, the other ones people keep watching over long periods, they may be from France, Africa or other places, they're all interested in K Beauty. The stakes are high for South Korean cosmetics makers and the country's economy, with exports of K Beauty products bringing in €8 billion last year alone. Well, that's all for this week. If you'd like to watch some of our previous editions of the show, you can check out our website or app or even the podcast platform of your choice by searching for people and profit. Now, in the meantime, thank you for watching and stay tuned. France 24.