Investors needn’t fear the rise of Europe’s green parties

Green parties across Europe are finding the centre-right to be natural allies. That will be great for business, says Matthew Lynn.

Over the last couple of decades, the green parties have positioned themselves as part of the radical left and the enemies of big business. Most corporate bosses and investors would probably rather see hard-left socialists in power than radical environmentalists. At least socialists are in favour of a productive economy, even if they don’t have much idea how to create one. But maybe that view is out of date.

Austria’s blue-green pact

In Austria, the conservative People’s Party chancellor, Sebastian Kurz, has just formed a coalition with the greens after breaking with his allies on the populist right. In Germany the greens are now the fastest rising political force, overtaking the Social Democrats as the main opposition party. It won’t be long before they replace the SPD in a coalition with the Christian Democrats to take control of Europe’s largest economy. Similar blue-green pacts may soon be formed across Europe. Parties that were once at opposite ends of the spectrum are working together.

Kurz’s move is the most interesting because it maps out the amount of common ground shared by conservative parties and environmentalists. The coalition agreement includes plenty of policies that will keep the greens happy, such as increasing the taxes on air travel, expanding the country’s rail network, a commitment for all of Austria’s electricity to be produced from renewable energy sources by 2030, and targets to make the country completely carbon neutral by 2040. But it also has plenty to keep the conservatives and their business allies happy as well, such as a commitment to cutting both personal and corporate taxes, tighter immigration controls and measures to promote national identity. Haggling out a deal looks to have been surprisingly easy.

In Germany, too, either after the present grand coalition falls apart, or after fresh elections a similar platform might be agreed. Angela Merkel’s CDU has already announced a package of environmental policies costing €60bn. A coalition with the greens would go further, but it wouldn’t exactly be a radical change of direction.

Beyond the fringe

We shouldn’t be that surprised that conservatives and greens can work together. There is no inherent ideological conflict between the two sides. Sure, a few environmentalists think any form of growth is bad in itself, but that is a fringe view and one that is fading as environmental parties move into the mainstream. There is nothing about tackling climate change, controlling pollution, or creating cleaner, healthier living spaces that will trouble anyone on the centre right. And among the more thoughtful greens, there may soon be a growing recognition that market- based solutions to environmental challenges may be more effective than big state-led projects. And that a wealthier economy will be able to afford to protect the environment better than a struggling one.

Indeed, some of the major growth industries of the next decade will be rooted in protecting the environment. Renewable energy is already a big business, and one that is getting more profitable (and competitive with fossil fuels) all the time. The battery industry, which will be vital as we switch to renewable electric power, will be just as big. Electric cars are already turning into the fastest growing sector of the automobile industry. Supermarkets and retailers have already invested heavily in making their operations more ecologically friendly; plastic bags are being phased out, and more and more food is sourced locally.

The greens are a rising political force in every European country. Business and investors might until recently have viewed that with trepidation. But if they can be allied with the centre-right, they could easily win a majority of the votes, and a mix of massive investment in trains, renewable energy, and curbing carbon emissions, along with tax cuts and pro-business competition policy, sounds like a credible combination. Green investment will stimulate demand, and so will tax cuts, while deregulation will encourage entrepreneurship. Businesses and greens can, it turns out, be natural allies.

Recommended

Why we will be reliant on fossil fuels for a long time to come
Energy

Why we will be reliant on fossil fuels for a long time to come

The energy crisis has shown us just how reliant we still are on fossil fuels. And we will continue to rely on them for a long time yet, says Merryn So…
27 Sep 2021
The charts that matter: China upsets cryptocurrency markets
Global Economy

The charts that matter: China upsets cryptocurrency markets

Bitcoin slid again this week after China declared all cryptocurrency transactions illegal. Here’s what’s happened to the charts that matter most to th…
25 Sep 2021
The US Federal Reserve is about to rein in its money-printing – what does that mean for markets?
US Economy

The US Federal Reserve is about to rein in its money-printing – what does that mean for markets?

America’s central bank is talking surprisingly tough about tightening monetary policy. And it’s not the only one. John Stepek looks at what it all mea…
23 Sep 2021
Warsaw and Stockholm: the unexpected new threats to the City of London
UK stockmarkets

Warsaw and Stockholm: the unexpected new threats to the City of London

London has seen off challenges from Frankfurt and Paris, but two other booming financial centres are a bigger threat, says Matthew Lynn.
19 Sep 2021

Most Popular

A nightmare 1970s scenario for investors is edging closer
Investment strategy

A nightmare 1970s scenario for investors is edging closer

Inflation need not be a worry unless it is driven by labour market shortages. Unfortunately, writes macroeconomist Philip Pilkington, that’s exactly w…
17 Sep 2021
What really causes inflation? Here’s what prices since 1970 tell us
Inflation

What really causes inflation? Here’s what prices since 1970 tell us

As UK inflation hits 3.2%, Dominic Frisby compares the cost of living 50 years ago with that of today, and explains how debt drives prices higher.
15 Sep 2021
The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021