Don’t get excited about the Dutch election result, Le Pen still has a 40% chance of victory: UBS

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Europe's mainstream political parties breathed a huge sigh of relief on Thursday after Dutch center-right Prime Minister Mark Rutte successfully fended off a serious challenge from Geert Wilder's far-right nationalists, yet the momentum for populist parties does not appear to have significantly wavered.

Wilders' anti-Islam anti-European Union Freedom Party had led in several opinion polls for the majority of the campaign but ultimately failed to mimic the Brexit vote and U.S. President Donald Trump's election victory by sealing another anti-establishment triumph.

The result was viewed by many as a bellwether for the rest of Europe ahead of general elections in both France and Germany later this year.

Wilders' defeat could breed voter complacency

Far-right parties in Europe are hoping to benefit from increased levels of support as Germany's Alternative for Deutschland (AfD) party are poised to enter federal parliament for the first time in September and, perhaps even more significantly, Marine Le Pen's anti-EU National Front (NF) are in contention to become France's ruling party in May.

"The unconvincing populist performance in the Netherlands may weigh on French voters' sense of urgency when heading for the ballots for their elections," a team of analysts at UBS said in a note.

"Hence, we caution against extrapolating the Dutch results, and continue to see a 40 percent chance of a Le Pen victory in France," UBS analysts added.

Centrist candidate Emmanuel Macron has consolidated his position as the front-runner to win the French election in May, although Marine Le Pen still leads in April's first round of the two-stage contest, according to opinion polls published Thursday.

Europe's establishment parties have vehemently argued that far-right populist groups, such as Le Pen's NF, pose a real threat to the future of the EU. Le Pen has pledged to hold a referendum on EU membership within six months of becoming president and has also called for France to ditch the single currency altogether.

Populism is 'far from dead'

A particularly surprising development from the Dutch election had been voter turnout which, according to Ipsos, was over 81 percent. The voter rate in the Netherlands soared to its highest level in over 30 years on Wednesday yet Alastair Newton, co-founder and director of Alavan, urged caution to investors who might look to apply the same metrics in France and assume this would hinder Le Pen's chances of success.

"In short, although I think that we are seeing something of a pushback against populism in Europe today and that we should feel some relief at the Dutch outcome, populism is far from dead, including in the Netherlands, and we should treat the French election on its own merits," Newton said in a note.