In last month's column I promised ConHome readers an update following the election results in France and Greece, and the recent developments in the Netherlands. The events of the past weekend were not at all surprising. Governments across Europe have been pounded by the economic crisis with almost every one losing office whenever it goes to the country. The voters have swung in all directions, not just to the left – with many swinging out to the extremes.
The collapse of the government in the Netherlands was always a distinct possibility. The minority coalition of the Liberal Conservative VVD and the Christian Democrat CDA relied on the votes of Geert Wilders. A few months ago the Netherlands Bureau for Economic Policy Analysis (CPB) published a new economic and fiscal outlook which predicted the deficit would hover around 4.7 percent for several years – far too high for the EU and likely to be incompatible under the 'European semester'. So the government set about finding between 10 and 18 billion Euros of extra cuts and tax increases. Wilders pulled his support for the government and it fell.
A five party agreement (including the Dutch Christian Union, whose MEP Peter Van Dalen sits in the ECR) has enabled a budget to be passed and an interim administration will tide the country over until the September 12th elections. The Netherlands needs economic reform – of the housing market, health care and the labour market. Wilders' PVV was one of the main roadblocks to achieving such reforms – so ironically his exit from the governmental agreement has created a new political arrangement in the Netherlands that might be able to make some headway. It is unfortunate that the Dutch political discourse has had to be so pre-occupied with meeting the EU's debt targets, rather than putting 100 percent of their energies into achieving growth.
A similar dilemma faces Spain where its leaders are breaking the nation's economic back trying to comply with impossible debt targets when it really requires major economic reform to promote growth.
The Liberal VVD is currently polling well but the socialists are gaining on them. The shape and colour of the next Dutch government is not yet clear but, with a summer of campaigning ahead, anything could happen.
It was telling that, when Boris won London by 51 percent of the vote, the BBC called it 'narrow'. When Hollande won 52 percent they called it 'clear' and 'decisive'. I was surprised by how close the result was. Hollande has hardly swept to power on some tide of euphoria in France. He narrowly defeated an unpopular, un-Conservative and frankly unappealing President who wasted his opportunity to reform his country.
The French people have ejected a social democrat and elected a socialist. Much has been made of the fact that Hollande will now attack the City of London, try to impose a Financial Transaction Tax, attempt to scrap the UK's EU rebate, and demand an agenda of further job-destroying social legislation from the EU. But hasn't that been France's position for years? Plus ça change, plus c'est la même chose.
It is true that until last weekend the left was demoralised and without a standard-bearer – especially after the DSK affair. But even with Hollande now representing the Socialist family in the European Council, they are still eclipsed by the EPP. Until last Sunday, our own AECR family was the second largest voting block in the European Council- with almost as many votes as the socialists and liberal Prime Ministers combined.
A two percent victory for a socialist in France should not immediately be interpreted as a major swing to the left across Europe. And we will not get a true picture of French public opinion until the legislative elections later this summer. A better showing for the UMP may restrict President Hollande's room for manoeuvre. Or a collapse of the UMP may see the National Front rise to become the main opposition. The alarm bells should be ringing.
However, the victory of Hollande should cause some concern in Brussels and Berlin and across the European centre-right. Merkel has always been the figurehead of the EPP, with Sarkozy acting as her attack dog. France still has an attack dog in the Elysee Palace – but now he is in the opposite corner of the political ring. I have no doubt that when Hollande travels to Berlin next week there will be nauseating displays of mutual adoration. I do not see how they can last when Hollande's entire platform runs contrary to almost everything that Merkel is trying to achieve.
The first test will be over the EU's Fiscal Compact Treaty. As I've said before, the treaty does nothing to solve this crisis. It is a dangerous distraction that effectively makes Keynesian spending illegal. With his 75 percent tax rate and anti-market rhetoric, how will Hollande achieve (false) growth unless he pumps state money into the economy? It is being reported that Hollande will simply ask for some vacuous growth policy statement to be attached to the new treaty. To do so would signal a humiliating climb-down, and an immediate victory for Merkel. Either way, the new treaty seems to be in serious trouble – further exonerating David Cameron for keeping the UK out of it.
It will take a few weeks before we know what kind of President Monsieur Hollande will become. However, one thing is clear: the EU order will be challenged.
Greece faces a crisis on just about every front: economic, political, social, migratory (both emigration and an influx of immigrants and asylum seekers).
In Sunday's election the combined votes of 19 percent for the parties not reaching the threshold for gaining seats was larger than the vote received by the largest party. It's a bit like the Liberal Democrats being beaten by a penguin (oh, hang on…)! But, seriously, the disparate spread of votes (in a country where voting is compulsory) just goes to show how the real winner of the election was the 'None of the Above' party.
The results seem to make it almost impossible for a stable coalition to be formed. New Democracy has failed. The anti-IMF intervention communists have failed. It seems probable that Greece will now undergo another set of elections in June – possibly with similar results.
It is quite clear that the people do not want to take the medicine being forced down their throats. They feel ignored and dictated to. Their voices must be heard. The fact that a party which wishes to place land mines on Greece's border now has 21 seats should surely act as a major wake-up call? It seems not.
One message that is clear from these elections is that the Greek people are sick and tired of the Troika (EU/IMF/ECB) overruling the Hellenic parliament. Angela Merkel is attempting to force the Greek people to become hyper-efficient and fiscally disciplined (i.e. German) overnight. It won't work, and it is leading the Greek people to believe that the rest of the euro zone is not acting in a spirit of 'solidarity' (a much-overused word in the EU).
Greece is bankrupt. It has been for months. It cannot pay its bills without help from the IMF and EU. But the crippling cuts imposed upon it are stalling any growth in the economy, leading to even further demands for spending cuts from the Troika.
Germany needs to rethink its strategy towards the euro. It cannot continue to enforce crippling austerity on the Greek people. The elastic band of public support is stretched to breaking point. It seems to me that, rather than another election, the Greek people need to be offered the referendum that Papandreou pledged before he was removed from office. The people could be presented with the options of leaving the Euro, defaulting and devaluing; or staying in and delivering the austerity required of it by the Troika. If Germany wants to nip the referendum in the bud then she should be prepared to renegotiate the Memorandum (an unlikely possibility).
Every other option is prolonging the heart-breaking misery of the Greek people. And driving people to dangerous extremes.
If there's one thing that we should take away from the last weekend it's this: the people are crying out to be listened to. They want to have control over their own destinies. They are getting tired of being ignored. We fail to heed these warnings at our peril.