Is the euro crisis responsible for populism?


Populists and extremists are on the rise across Europe. Even Germany is now seeing the rise of a eurosceptic party. The euro crisis is the reason for growing political risk in the eurozone. Or is it? True, populist parties are more important in several euro countries. But the reasons for this are manifold and it is hard to detect a Europe-wide trend. An end to the euro crisis would not guarantee a return to predictable two-camp politics.

What is populism? At the most basic level, a populist is someone who advocates measures that you do not like. For the right-wing press, populists are the people who call for higher taxes, more welfare and the protection of industries. For the left-wing media, it is people who oppose immigration, diversity and the EU.

What populists tend to have in common is that they contrast themselves with the political elites. "Populism is as much about style as it is about substance", says Tim Bale, politics professor at Queen Mary University in London and an expert on the subject. Populists usually claim that they alone represent the people while established political parties are portrayed as self-serving, aloof and corrupt. Populists dislike representative democracy and love referendums.

Applying this definition, the rise in populism in Europe predates the euro crisis by quite a few years. Think of Jörg Haider in Austria, Pim Fortuyn in the Netherlands, the Kaczynski brothers in Poland or Jean-Marie Le Pen in France.

Two trends have eroded people’s trust in public authority and thus helped the populists. First, globalisation, immigration and technological change are making life more complex. Centre-left parties can no longer credibly promise jobs and social security. The centre-right’s notions of stable families and individual responsibility sound barely credible. As old ideological divisions blur, mainstream parties on both sides promise to do 'whatever works'. Confused voters find the populists' clear, simplistic messages appealing.

Second, the spread of the internet and new media can help political upstarts to mobilise the masses. Many people nowadays trust the internet more than the mainstream media. And in their attempt to regain ratings, even serious broadcasters give colourful populists more air time than 'boring' centrists.

The euro crisis has not caused European populism but it is certainly fuelling it. In these vexing times, the simple solutions peddled by the populists are gaining traction in many eurozone countries. But each country has its idiosyncrasies.

Voters in some of the northern creditor countries got restive first. The eurosceptic and anti-immigration Freedom Party almost tripled its share in the Dutch election in 2010. One year later, the anti-bailout True Finns became the third largest party in the Finnish parliament. However, both parties seemed to have peaked already. In 2012, the Freedom Party's vote collapsed in the Dutch general elections, as did support for the True Finns in local elections.

Is it Germany's turn now? With the Alternative für Deutschland (AfD), a eurosceptic party will for the first time contest a general election in Germany in September. The AfD's main objective is for Germany to leave the euro, although the party supports other aspects of European integration. One opinion poll showed that almost a quarter of Germans would "in principle" consider voting for a eurosceptic party; but in another poll, only 3 per cent said they would choose AfD if elections took place now. The AfD’s leader, Bernd Lucke, a soft-spoken boyish-looking academic, is an odd sort of populist, although, like most of his European peers, he promises more direct democracy and an end to the politics of yore. However, since most of the party’s upper echelon consists of bespectacled professors and well-to-do businessmen, it appeals to middle-class centrist voters – who are overwhelmingly still happy with Angela Merkel and her euro policies.

In Germany, as in other North European countries, the main impact of the populists is that they throw well-rehearsed coalition politics into disarray. The AfD might not get the 5 per cent needed for parliamentary seats. But it might steal just enough votes from the (already suffering) Liberals to deprive Merkel of her natural coalition partner after September. Populists also have impact because mainstream politicians often feel compelled to usurp their ideas. Such tactics hardly ever work, partly because the populists can easily move to further extremes and partly because moderate voters (still a majority in all North European countries) resent politicians chasing the populist vote.

If populism in Northern Europe is destabilising but not disastrous, what about the south? In Greece and Italy, the populists are no longer fringe figures. In the Greek elections of May 2012, the hard-left Syriza party came first after promising Greeks an end to EU-imposed austerity; the neo-fascist Golden Dawn got 7 per cent, with a similar share going to another right-wing nationalist party (a re-run of the vote a month later lifted the centre-right New Democracy just above Syriza but otherwise changed little). In Italy’s election in February 2013, the anti-EU Five Star Movement of Beppe Grillo gained 25 per cent, a bigger slice than any other single party.

With unemployment now standing at 27 per cent in Greece, and Italy suffering its longest recession in two decades, how could people not have voted for populists? They could have. Spain also has 27 per cent unemployment and not a populist in sight. The Irish and Portuguese people have suffered tremendously in the euro crisis but they have not deserted the established parties.

Greece and Italy stand out because their political systems had become dysfunctional long before the economic crisis. Corruption and nepotism exist in most European countries – but not to the extent that used to prevail in Rome and Athens. It is therefore understandable that Greeks and Italians now refuse to back established parties that have done little for their respective countries in decades.

The deepest rift in Greek politics runs not between supporters and opponents of austerity but between those who have long benefited from a bloated public sector (protected by, and closely intertwined with, New Democracy and the other mainstream party, Pasok) and those in the private sector who have borne the brunt of austerity.  To them Syriza’s promises of free health care and school meals, generous social welfare and higher minimum wages look appealing. But many of them simply cannot stomach supporting the two traditional parties of power anymore.

Greece is also one of the few places where the crisis has boosted the extreme right. One reason is growing resentment of the million-odd immigrants who arrived during the good years. Another is the breakdown of law and order that has accompanied the Greek economic collapse. The state is in such disarray that many Greeks now welcome Golden Dawn’s black-shirted hoodlums bringing some ‘order’ to their neighbourhoods – even if that entails hundreds of immigrants ending up in hospital after brutal beatings.

In Italy, the right-wing Lega Nord got a measly 4 per cent in the 2013 election. It had become tainted by too many years in government. Italians rejected all established political parties in the last vote, irrespective of whether they were pro or anti-austerity. They did not vote for their erstwhile technocratic prime minister, Mario Monti, either. Monti's tax hikes and budget cuts did not win him many friends. But his approval ratings (once at a stellar 70 per cent) only collapsed once he stopped being a technocrat and entered the political fray as an election candidate.

The tragedy in Greece and Italy is that this much-overdue re-ordering and renewal of the political system comes at a time when both countries desperately need strong and stable governments. It might be years before that is a realistic prospect. Populists do have a habit of running out of steam. The closer they get to power, the more they come under pressure to present credible solutions and make compromises. At this point, they either become mainstream or they deflate. Until this happens, populism and political uncertainty will continue to make the euro crisis more combustible.

However, it is not certain that an end to austerity would make Greek and Italian politics predictable, nor that without further bailouts there would be no populism in Northern Europe. In an age where voters are both confused and easily malleable via the internet and social media, politics will not return to the staid two or three party systems of the post-war years. 

Katinka Barysch is deputy director of the Centre for European Reform.

Euro-Realism: A British-German Axis?

Alphen, Netherlands. 15 April.  Former German Chancellor Gerhard Schroeder once said, “They have it wrong if they ask if Schroeder favours Britain over France or France over Britain.  Schroeder favours Germany”.  Watching David Cameron with family enjoying a German weekend break with Angela Merkel one could be forgiven for thinking all is well in the British-German relationship.  And yet for all the well-publicised frictions it is equally clear that Cameron and Merkel get on.  It is also clear that the two countries need and will need each other.  Is this the beginning of a British-German axis?
 
There is after all much to unite Britain and Germany.  According to the CIA World Factbook (it must be true then) Britain and Germany are the two biggest EU countries with the two largest economies by purchasing power parity.  Germany is Europe’s economic leader whilst Britain remains (just) Europe’s military leader.  The two countries also share a surprisingly close strategic relationship on a whole raft of issues not least the two most pressing; the lack of fiscal resources and the need for Europe to become competitive.
Furthermore, Cameron and Merkel are natural political allies.  They are both moderate conservatives committed to the control of public spending through strong austerity programmes which is rejected by France and many other EU countries.  Merkel has a strong sense of history and respects the role played by Britain in both World War Two and the Cold War.  Indeed, she believes fervently that EU influence and legitimacy without Britain would be dangerously weakened. 
The weekend’s photo opportunities also sent a strong political message to France’s President Hollande that Berlin has options.  The Franco-German axis long the core pillar of the European project is not what it was.  Perhaps in the week Margaret Thatcher died Cameron and Merkel were also sending a message about the importance of personal chemistry between leaders implicitly recalling the Reagan-Thatcher years. 
Berlin also seems to have grasped another reality missed by many commentators.  However it is dressed up come the German elections in September if Merkel is to save the Euro thereafter some form of debt mutualisation will be necessary.  This could cost Germany over time some 10% of its GDP if France goes over the edge of the fiscal-debt cliff where it is headed.  Equally, for all its current travails Britain does not face the growth-destroying consequences of the coming decade of Eurozone debt mutualisation/restructuring and can and is competitively devaluing the pound. 
That’s the good news; here’s the euro-realism.  There was a paradox in the Cameron-Merkel speak that emerged from the weekend that also highlights the very deep structural divisions between Britain and Germany over Europe.  Yes they both talked of reforming the EU and yes both suggested there would be need for treaty change.  However, what Cameron seeks is the partial deconstruction of the EU. He is particularly keen to put the European Commission back in a box in which its ‘competences’ are both defined and finite.  Merkel, on the other hand, is desperate to avoid any suggestion (as some are implying) that the EU is fast becoming the “Fourth Reich”.  She thus needs Brussels, and in particular the Commission, to legitimise much-needed German leadership and thus wants more ‘Europe’ not less.  In other words, Cameron and Merkel may appear to agree but in fact are fundamentally opposed on the key issue of more or less Europe.  This is something which will become all too apparent in the year ahead and which will test the Cameron-Merkel relationship sorely.
Cameron said last week that the support of the British people for the EU is “wafer thin”.  He was being polite.  The moment Merkel moves to deepen integration the bottom is likely to fall out of pro-EU arguments in a Britain that already suffers a huge trade deficit with the EU, even as it enjoys a trade surplus with the rest of the world.
Therefore, in the coming test it is vital that Berlin and London somehow find projects on which to work closely together.  Critically, they must emphasise those areas of shared and pragmatic NATIONAL interest both in Europe and the wider world.  That will take confidence-building in each other, which was after all the purpose of this weekend’s visit.  What can Britain do now to reciprocate?  Cameron must come out unequivocally against growing anti-German sentiment in Europe.  Attack Berlin for policy mistakes by all means (that is democracy) but any parallel drawn between today’s Germany and the Nazis is offensive and must be confronted.
Why Britain?  A senior German once told me that the only ordinary state-to-state relationship Germany enjoys with any European state is that with Britain.  Every other relationship still somehow suffers from guilt on one side and fear on the other.  With Britain it was different, he said, “...because we bombed you and you bombed us!”
So, no British-German axis but Britain and Germany will need each other.
Julian Lindley-French