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The resounding gains made by the anti-EU parties in last week's European parliamentary elections have alerted Europe's mainstream leadership to its fundamentally precarious position. This a warning Stratfor sounded more than two years ago when we predicted the rise of the far right and cautioned that these fringe groups should not be underestimated, precisely because they were tapping into very real and deepening sentiments that emerged from the economic and social malaise that has developed since 2008.
The highest levels of European leadership are finally and unequivocally feeling the political consequences of years of unemployment and stagnating growth across much of the continent. The dismal election results for many of the mainstream European parties (particularly in France, Spain and the United Kingdom) overshadowed the small but much-lauded gross domestic product growth figures for the year to date that dominated headlines until last week.
The current European leadership sees the rapid rise of Euroskeptical parties as an existential threat to the postwar order in Europe. This is not only because of old specters of Europe's bloody nationalist past, but also because the economic and financial stability of the continent has been rigged (sometimes haphazardly) around the open market and common currency that these Euroskeptical parties want to recuse.
Reversing the trend of growing popularity for Euroskeptical radical parties will therefore become even more of a priority for Europe's leadership. On a tactical level, mainstream parties will have to co-opt some of the more palatable platforms of their fringe counterparts to try to draw back in a wider majority of voters -- including restarting debates on immigration and the welfare state. The problem, of course, is that doing so will only accentuate the divisions and clashes among EU members rather than harmonizing their very different solutions to very different problems.
In fact, the only avenue for hope for the European project lies at the supranational level, with Germany being able to rally enough support from its European peers to lead radical reforms and drive further integration among its members. Berlin has understood this very well for some time. However, constrained by an electorate that would balk at the idea of sacrificing Germany's welfare for that of a financially distressed neighbor, German Chancellor Angela Merkel has walked the line very carefully so far.
The victory of the anti-EU parties may be a catalyst for Berlin and its other mainstream political allies to accelerate the fundamental reforms needed to return to growth while they still have the political capital to do so. This shorter-than-expected timeline adds urgency to controversial structural reforms designed to deepen integration and ultimately give the creditors -- Germany -- more of a say in how eurozone countries manage their banks and budgets.
The question is: Does Germany have that kind of time? Growth remains stagnant and unemployment is high. Moreover, there are still major outstanding issues on how to enforce bank lending across highly varied eurozone economies, how to enforce deficit targets, who decides which banks survive and fail, and myriad others.
While Berlin and its allies can try to accelerate the reforms while they still have the votes, they risk creating much deeper political divisions at home. The already growing Euroskepticism and other fringe parties will benefit from the unavoidable period of pain that would accompany the early stages of these wide-ranging reforms. Even if the end results of these reforms were guaranteed to be spectacular (which they are not), there is a risk that a changing European political landscape will deny them a real opportunity to work.
On a practical level, the EU Parliament elections will bring little visible short-term change. But even as the sting of defeat for the mainstream parties disappears from the headlines, plans and strategies are being set into motion by a very desperate European political elite that worries it may not get enough time to act before it is too late.
Courtesy : Stratfor (www.stratfor.com)