BERLIN – The euro crisis, it is said, is over. Calm has returned to financial markets, amid ironclad assurances by the European Union authorities – particularly the European Central Bank – that the monetary union will be preserved. But Southern Europe’s economies remain depressed, and the eurozone as a whole is suffering from stagnant growth, deflationary pressure, and, in the crisis countries, persistently high unemployment.
Not surprisingly, given the EU authorities’ obvious inability to end the malaise, many member states are losing patience with austerity. Indeed, some countries are facing a political upheaval.
When the turmoil comes, it is likely to be triggered – as with the euro crisis – by Greece, which is holding a presidential election that seems unlikely to produce a winner. If the Greek parliament does not elect a new president by a two-thirds majority in next week’s third and final round, it will be dissolved and a snap election will be called. The risk is that Syriza, a far-left socialist party, will come to power.
To win, Syriza must either mislead its voters about its options, or insist that it will renegotiate the repayment conditions imposed on Greece by the so-called Troika (the European Commission, the ECB, and the International Monetary Fund), all while pursuing unilateral action should renegotiation fail. But any renegotiation following a Syriza victory would undoubtedly unleash a political avalanche in the southern EU that would sweep away austerity and fully reignite the eurozone crisis.
Of course, Greece itself is too small for its problems to present any real danger to the eurozone. But the election result in Athens could fuel panic in financial markets, causing a crisis that would threaten to spill over into Italy, the eurozone’s third-largest economy, and, with some delay, France, the second largest.
A miracle could occur: a new president could be elected in Athens next week, or Syriza might not win the next parliamentary election. Unfortunately, either outcome would merely delay a politics-induced crisis in the EU. After all, in Italy, too, the signs point to a coming storm – one bearing down not only on austerity, but also increasingly on the euro itself. And after the storm hits Italy, France could be next.
The conflict over austerity has become politically explosive because it is becoming a conflict between Germany and Italy – and, worse, between Germany and France, the tandem that drove European integration for six decades. And this is happening at a time when anti-European, nationalist forces are establishing themselves in Germany’s national and state parliaments – and on the streets – thereby substantially reduce Chancellor Angela Merkel’s room for compromise. The battle between austerity’s defenders and opponents thus threatens to tear apart not just the eurozone, but the EU as a whole.
The crisis in the eurozone and the refusal to attempt any real European approach to reviving growth has contributed – not exclusively, but significantly – to the rebirth of nationalism within the EU. The strength of this political tendency became fully apparent in May 2014, when anti-European populists performed well in the European Parliament election. The nationalist trend has continued unabated ever since.
On one level, this seems bizarre. After all, none of the problems that Europe is or will be facing can be solved more easily alone and at the national level than within the EU and through the framework of a supranational political community. Indeed, nationalist xenophobia is particularly absurd in view of demographic realities: An aging Europe urgently needs more immigrants, not less.
It is also remarkable how little Europe has been scandalized by the support that the EU’s new and old nationalists have received from Russia; for example, President Vladimir Putin’s government helped to finance the French National Front via a multi-million-euro loan drawn on a Russian bank. Apparently, authoritarian values and nationalist worldviews (together with a strong dose of anti-Americanism) create ties that bind.
It is no exaggeration to say that the EU is currently both internally and externally threatened by reactionary nationalism, which is why the next euro crisis will come in the form of a political crisis. So why are the authorities in Berlin, Brussels, and the other EU capitals still not willing to change their policies, which quite obviously have made a bad situation worse? Observing the EU from the outside is like watching a train collision in slow motion – and one that was announced at the station.
And then there is the United Kingdom, moving steadily and with apparent determination ever closer to a “Brexit.” That danger extends beyond 2015; nonetheless, it is an important component of the overall picture of impending crisis in the EU. Regardless of whether the UK ultimately separates politically from the continent, the coming year will mark a turning point for Europe.
Copyright: Project Syndicate/Institute for Human Sciences, 2014.
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