First Brexit, now Frexit? Fears grow over the power of populist politics

Populist parties and politicians around the world and Europe have celebrated Britain's decision to leave the European Union (EU) but the specter of reactionary politics is worrying many in the political establishment and business world.

Populist leaders from Donald Trump in the U.S. to Marine Le Pen in France have hailed the decision by 52 percent of Brits to leave the EU last Thursday, saying that the will of the people had been made clear and have been emboldened by the vote to leave the bloc.

European parties in particular – such as Le Pen's far-right Front National (FN), the anti-establishment 5-Star Movement (M5S) or anti-immigrant Northern League in Italy, Sweden's far-right Sweden Democrats party and Germany's Alternative für Deutschland – all welcomed the vote and called for their own referendums on the EU or single currency – leading to the rise of terms such as "Frexit," "Swexit" and "Dexit."

Populist parties have grown in power and prominence in the EU in the last few years, particularly amid a backlash against an influx of refugees.

Speaking to CNBC in Paris on Thursday, Publicis Chief Executive Maurice Levy told CNBC that he believed that populism was a burgeoning threat but that the reasons for their popularity – seen as protest votes by those who are disenchanted with traditional mainstream parties - needed to be addressed.

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Bruno Vigneron | Getty Images

"Populism is everywhere, in all the big countries. It's in the U.S. with Trump, in the U.K. and you've seen what happened in the U.K. with people (in the leave campaign) who have no real plan for the future. It is in Austria, it is in France, it is also in Italy," he said.

"I believe that the problem of populism is not so much that there are populists but the fact that we are not bringing the answers to the questions that people have so we have to listen to the people and their worries and think about how we can address the big issues that people have- about employment, immigration, their own future and how they can cope, their kids and families- there are a lot of issues."

Worryingly for an "old guard" of politicians, populist parties are gaining traction in the polls. Only a few weeks ago, Italy's anti-euro M5S party won what were seen as landslide victories against Prime Minister Matteo Renzi's Democratic Party in local elections in Rome and Turin.

However, the political elite could take comfort from looking at Spain's recent election where Unidos Podemos, a populist anti-austerity alliance in Spain, did not fare as well as it did in previous votes.

In a general election last week after an inconclusive vote in December, Unidos Podemos failed to increase the number of seats it won six months ago. Yet, showing voter dissatisfaction with the establishment, the main Popular Party led by Prime Minister Mariano Rajoy still failed to win enough votes to govern alone, causing yet another hung parliament.

Is Frexit possible?

Meanwhile in France, attention is on the National Front and whether its leader Marine Le Pen will do well in the 2017 presidential elections although most analysts and business leaders do not expect her to make it past a second-round run-off vote in the election. Like many other countries, France operates a two-round voting system if no candidate wins an absolute majority of the vote in the first round.

Levy did not think leaders like Le Pen would be elected but nonetheless said the rise of populism was a "clearly a big problem in France as in many other democracies."

"It's more bad news for the EU and the future of the Europeans rather than for business immediately. I am not very worried about the short-term business issues, I'm much more worried about the future and what this means for future generations."

Raphael Brun-Aguerre, an economist at JPMorgan, said in a note on Wednesday that although the Brexit vote had galvanized Le Pen's party, she was not likely to get the "Frexit" vote she was looking for.

"Although the National Front is in favor of an in-out EU referendum, in our view, it will not get its way. However, other presidential candidates will likely accept the need for some kind of referendum on the future of the EU. A reflection on the future of Europe, which does not question France's part in it, may ultimately be offered to the people in a referendum," he said.

Brun-Aguerre noted that, in theory, only a president can call a national referendum and that Le Pen was very unlikely to win the presidential election next year. Still, he warned that other candidates "will need to position themselves on the issue" of the EU.

"Her party could do well at the first round of the elections (open to many candidates) and she could qualify for the second round of the elections (open only to the first two candidates). But center-left and center-right forces are likely to unite against her if she gets to that stage."

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