Why the European recovery is not enough

The European project has run out of steam and countering populism would require policies that address disruptions caused by globalisation

It was now supposed to be hunky-dory for Europe after too many years of stagnation and adverse developments: The Dutch general election last March did not see the much-feared victory of the Party for Freedom of Geert Wilders — which nevertheless came second; Emmanuel Macron was elected in May as the French President, beating easily the populist leader Marine le Pen. In September, Angela Merkel won her fourth term as the chancellor of Germany — but her party had its worst results since 1949 and the far-right AfD Party surged to third position becoming the first far-right party to enter Parliament since 1949, with 94 seats out of 589. With the recovery in the Euro Zone gaining momentum, and no populist, anti-European party gaining power, you could read stories about Europe being now out of the woods, and the process of European integration being re-launched under the leadership of Mr Macron and Ms Merkel. 

The results of the Austrian election on Sunday, October 15, have put some dampener on this optimistic view. The outstanding victory of Sebastian Kurz and his Eurosceptic and anti-immigration People’s Party, and the second place of the far-right Freedom Party have set the stage for a sharp turn to the right for Austria, with an anti-immigration and anti-European coalition set to come to power.

In fact, on a closer look at what has happened on the political scene in Europe, it would have been easy to notice that far from fading quietly away, the far right had gained ground in all the elections that had taken place, i.e. the Netherlands, France, Germany and Austria. It may be seen as a consolation that it did not get to power – except now in Austria – but the fact is that it will be able to weigh on national policies more than ever. It has taken 208 days for Mark Rütte to form a government in the Netherlands but his four-party coalition is a such a hodgepodge of different positions on domestic as well as international issues – including Europe – that the odds of it surviving its four-year mandate look very slim. In Germany, Ms Merkel may have won a fourth mandate but she is considerably weakened — as was illustrated again by the defeat of her party to the SPD in last Sunday’s lower Saxony elections. Her negotiations with the Greens and the Free Democratic Party (FDP) promise to be extremely laborious, as it will be very difficult to reconcile the views of the FDP and of the CDU on Europe or the views of the CSU and the Greens on some key economic and domestic issues.

That the recovery is gaining momentum in the Euro Zone is now well established. However, it is quite a mistake to consider that better economic prospects will provide the counter force needed to repel the populist movement in Europe. The resentment and suspicion towards the business/political/intelligentsia establishment is now too deeply rooted; the feeling of very large segments of the population that they were made to pay for the financial crisis while the elite that created it came out unscathed remains too strong; the pervasive sense of insecurity about the future and of loss of identity because of the immigration wave is too solidly entrenched. 

What will help efficiently fight the populist momentum – whether from the Far Right or the Far Left – are policies that would really address the economic and social disruptions  created by the accelerating technological revolution and by globalisation; education systems that would help ensure long-term employability; measures to reduce the widening wealth distribution gap; the balanced affirmation of national identity, which would avoid the trap of xenophobia while not being afraid to challenge the dictatorship of the “politically correct” when it comes to issues related to immigration. We are not yet there in Europe as the measures and policies taken so far have been too timid to restore confidence — and we are definitely not yet there either in the US, as the election of Donald Trump has proved.

Illustration by Binay Sinha.

In the same way, there is a lot of wishful thinking in the notion that the Merkel-Macron duo will be able to impulse a strong momentum to the process of European integration. The French and German leaders don’t see eye to eye when it comes to defining precisely what is meant by “a more integrated Europe”: Mr Macron sees the mutualisation of risks as a key element to anchor the financial and monetary stability of the Euro Zone while Ms Merkel remains strongly opposed to this notion which is anathema to the German public. Even if she would personally be ready to look at some kind of compromise between Paris and Berlin’s views the heteroclite nature of the coalition that she tries to form would severely restrain her margin of manoeuvre. 

In addition to that, there is no underestimating the evolution of the public opinions in different countries of the EU. The Italians are definitely not in favour of any further integration that would impose additional controls and constraints on their banking sector, hobbled by €370 billion of bad debt. And, neither the Czech government, nor the Hungarian nor the Polish – and now the Austrian – would be ready for any further transfer of power to European bodies.

After the Brexit vote, it was somewhat ironic to hear voices in Brussels expressing the view that now that the Brits will be out it would be easier to move ahead with further integration. In fact, the British opposition may have been a blessing in disguise since, left to itself, the integrationist zeal would have created an even more severe public anti-European backlash in many EU countries. The reality is that the European project is today out of steam. Mr Macron was not elected because he was running on a pro-European platform but because people were too scarred by Ms Le Pen and some of her patently incoherent views.

As welcome as it is, the recovery in the Euro Zone is not in itself sufficient to recreate a strong, adhesion to the reinforcement of the European project in too many quarters on the continent. In itself, it will also not be enough to contain and reverse the attraction of populism. Europe has still a long way to go – and probably needs more new leaders – to be really out of the woods.

The writer is president of Smadja & Smadja, a strategic advisory firm.

Twitter: @ClaudeSmadja