The edge of unity: can the euro hold as Europe divides?

Europe’s political map is tilting, and the centre may not hold. Once-fringe nationalist and far-right parties are no longer outliers; they’re winning. In Austria, Herbert Kickl’s Freedom Party (FPÖ) topped national elections for the first time since WWII. France’s Marine Le Pen dealt Emmanuel Macron a bruising defeat in the 2024 European Parliament vote, triggering snap legislative elections. Germany’s AfD broke through with a historic win in Thuringia. Even Belgium, home to the EU institutions, now sees Bart De Wever, an avowed Flemish nationalist, steering the federal government.

This isn’t just a political moment. It’s a market signal. The euro, always a symbol of integration, is now caught in the crosswinds of fragmentation. And the impact on FX strategy? Anything but theoretical.

The euro’s real driver? Belief, not basis points

The euro isn’t driven solely by rates or inflation forecasts; it’s a barometer of belief in Europe’s cohesion. When that belief wavers, so does the currency’s footing.

Today’s far-right parties are more strategic than the old Eurosceptic vanguard. Few call for exit anymore. Instead, they target the machinery of integration: blocking shared fiscal tools, resisting collective debt, and pushing national agendas over compromise. The rhetoric may be softer, but the consequences are real: stalled reforms, policy gridlock, and persistent political noise that unnerves markets.

For businesses with EUR exposure, this isn’t abstract. It’s a real-time volatility driver and a reminder that FX risk often starts at the ballot box.

Hope has a pulse and a strategy

As the radical right rises, so too does the response. In Romania’s 2024 presidential race, nationalist George Simion prematurely declared victory, only to be overtaken by Bucharest’s liberal mayor Nicușor Dan as votes were counted. In Poland, a second-round runoff looms between liberal Rafał Trzaskowski and conservative Karol Nawrocki, with the left performing far better than expected.

These aren’t isolated flickers, they’re signs of political recalibration. Once-passive centrism is giving way to active resistance. As Churchill once said, “To each, there comes in their lifetime a special moment when they are figuratively tapped on the shoulder and asked to do something unique. What a tragedy if that moment finds them unprepared.”

Europe’s centre-left may be rising to that moment.

Ballots, not balance sheets

Currency markets crave clarity, but Europe’s politics are increasingly fragmented. Nationalist gains bring not just economic divergence, but political drift: countries pulling apart on fiscal rules, energy plans, and investment priorities. That friction won’t break the euro, but it clouds its future. Progress on capital markets union, green funding, and EU enlargement could stall, triggering EUR volatility not from fundamentals, but from discord.

Europe needs unity more than ever, especially as US protectionism resurfaces. As economist and Nobel laureate Paul Krugman put it: “Above all, Europe needs to overcome its learned helplessness and act like the great power it is, especially given America’s apparent determination to destroy the pillars of its own strength.”

The Draghi Report highlighted Europe’s untapped potential: strip out the tech sector, and EU productivity has kept pace with, and even outperformed, the US. But that promise can’t scale without political alignment. Growth needs unity. And unity is what’s in play.

Our take: don’t just react, position

Political risk isn’t new. But this wave is different. It’s homegrown, intra-European and getting harder to price. At Bondford, we help clients stay ahead of the curve: stress-testing for instability, building resilience into FX strategies, and looking beyond the next rate decision.

Because when cohesion wobbles, clarity is your best currency.

The euro may endure. But if the EU starts singing from different hymn sheets, the tune will change, and markets will listen.