The fashionable European Union and euro zone breakup scenario just became a little less credible. In what was trumpeted as a victory for the anti-populist, pro-European forces, the ruling VVD party of Prime Minister Mark Rutte emerged on top in the Dutch elections and investors took cheer.
There is little doubt that political risk in the euro zone and the wider European Union has now diminished somewhat. The rising prices of Dutch and French sovereign bonds, the strengthening euro and the FTSE-100's climb to a record high on Thursday said as much.
But it has far from disappeared. To say that the VVD's victory, and the apparent defeat of Geert Wilders's anti-Islam, anti-EU Freedom Party (PVV), means that the populist surge in France and Italy is about to go into high-speed reverse is premature. Many millions of Europeans still have deep concerns about immigration levels and integration, the wealth divide, cruelly high youth unemployment and the perceived ineffectiveness of the centrist parties that generally rule the roost.
The preliminary Dutch results show that the victory of Mr. Rutte's Liberals was not exactly resounding even though he had swung to the right in an effort to steal some of Mr. Wilders's thunder.
His VVD party looks to have shed eight seats in the 150-seat parliament, taking it to 33 seats. Another centrist party that lost support was the Labour Party (PvdA) of Dutch Finance Minister Jeroen Dijsselbloem, which had been one of Mr. Rutte's coalition partners. The result will almost certainly shake up the Eurogroup – the finance ministers of the euro zone countries – which is led by Mr. Dijsselboem. It seems unlikely he will return as finance minister, "leaving his role as head of the Eurogroup in doubt," RBC said in a Thursday morning note.
While Mr. Wilders performed less well than the polls had suggested, his PVV actually made gains, taking 13 per cent of the vote, up from 10 per cent in the 2012 election. As a result, the PVV will probably occupy 19 or 20 seats in parliament, up from 15. "We were the 3rd largest party in the Netherlands. Now we're the 2nd largest party. Next time we will be 1," Mr. Wilders said in a tweet.
As leader of the largest party, there is no doubt that Mr. Rutte will remain Prime Minister and take the lead in forming a coalition government with the smaller, pro-Europe parties, such as D66 and Green Links, both of which made compelling gains. The process of forming a government in the highly fragmented Dutch parliament could take months.
In spite of Mr. Rutte's shabbier showing in an election that produced record voter turnout of 82 per cent, mainstream parties across the EU were ecstatic.
Martin Schulz, the former EU Parliament president who is now Germany's Social Democrat contender for the German chancellorship, used a tweet to say "I am relieved." Italy's centre-left Prime Minister, Paolo Gentiloni, tweeted "No Nexit. The anti-EU right has lost the Dutch election." Scotland's First Minister, Nicola Sturgeon, was the most succinct of them all, saying simply "Good" in her tweet.
Their enthusiasm for Mr. Rutte's victory, and Mr. Wilders's failure to place first, seems overindulgent. In reality, Mr. Wilders could never have formed a government even if, against all odds, his PVV had placed first.
With 28 parties on the poll, the result was destined to be a messy coalition government of four or five parties, none of whom would have embraced the far-right Mr. Wilders and his squad of EU-bashing xenophobes. The Dutch parliament, unlike the parliaments in Britain and Canada, does not operate under a first-past-the-post system.
The French presidential election is also a first-past-the-post system, one that could be won by the Front National's Marine Le Pen, the hater of all things European who is predicted to win the first round of the presidential election, on April 23. She is not predicted to emerge victorious from the second round as the independent candidate Emmanuel Macron comes on strong, but the scenario is not out of the question. Just because Mr. Wilders lost does not mean the French populists are dead.
In Italy, the populist, Euroskeptic Five Star Movement, led by comedian Beppe Grillo, is on top of the polls and may make further gains ahead of the election, which may be held in the fall, as the ruling Democratic Party is split by defections. Five Star vows to hold a referendum on the euro if it wins the election.
In a note, Rabobank suggested that investors should avoid complacency even though Mr. Wilders will not enter the Dutch government, noting that the "poor showing on the part of the PVV could be seen simply as an outlier among the other populist events of Brexit and U.S. elections. " The populist surge, in other words, may not be over. As if to reinforce that point, Mr. Wilders tweeted: "Rutte has not seen the last of me yet."