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Sep 4, 2014 | 09:16 GMT

EU Crisis and Political Fragmentation Persist

EU Crisis Deepens Along with Political Fragmentation
(PATRICK HERTZOG/AFP/Getty Images)
Summary

In Europe, the summer season is almost over and, along with cold weather, the Continent's political and economic problems are returning. Data released over the past few days suggest that, despite recent expressions of government optimism, the fragile economy is still causing political repercussions across Europe. Germany, France, Italy and Spain — the four largest economies in the eurozone — are feeling the impact of the crisis, albeit in different ways. Recent political developments are also a reminder of the strong connection between weak economies and the increasing popularity of anti-system political parties. Despite the recent optimism of European governments and EU officials, the social, economic and political effects of the crisis will continue to be felt in Europe for years.

On Sept. 2, Spain's Ministry of Employment announced that the number of people registered as unemployed grew between July and August, while the number of people registered as employed contracted. Although the recent numbers are better than those from 2013, this marks the first contraction in employment in six months. On Sept. 1, the Bank of Spain announced that bank credit extended to Spanish companies fell by 9 percent year-on-year in July. Spanish companies, like most European companies, rely heavily on credit for funding. Spain will see some economic growth this year (1.1 percent, according to the European Commission), but tight credit conditions will continue to undermine the possibility of long-term economic growth.

This negative economic data underpins recent political developments in Spain. On Aug. 31, an opinion poll revealed that support for the anti-system Podemos party had reached 21.1 percent, a new high for a party that was created less than a year ago. Podemos severely criticizes the European Union's austerity measures as well as the Spanish elites who back them, and the party made headlines in May when it received 7.9 percent of the vote in European Parliament elections. The party's rising popularity is a significant challenge to Spain's traditional center-left and center-right parties, which have dominated the country's political scene for three decades. It is also symptomatic of similar developments across the Continent.

Podemos' meteoric electoral growth in Spain has precedent elsewhere in the eurozone. In Greece, the anti-establishment Syriza party brought an end to the country's two-party system in 2012 and forced the center-left and the center-right to form a coalition government to retain power. Syriza remains a key player in Greek politics and will be a serious challenger in the next general elections, which will be held at some point before mid-2016. Podemos, however, has yet to overcome ideological differences within the party and personalistic tendencies of leader and founder Pablo Iglesias — the same problems that weakened Italy's Euroskeptical Five Star Movement.

Italy's economic numbers are also lackluster. The business association Confesercenti announced Sept. 2 that for every company created in Italy, two close, and that by June more than 40 percent of the businesses that began in 2010 had disappeared. Much like Spain, tight credit conditions and weak domestic demand have led to this increasing number of bankruptcies.

As in Spain and Greece, Italy's problems have also affected the political situation. Italian Prime Minister Matteo Renzi is still struggling to gain parliamentary approval for most of the reforms he included in the ambitious government plan he announced when he took over the Italian government in February. On Sept. 2, Renzi presented a plan for a series of reforms meant to be approved within the next 1,000 days. When he became the prime minister six months ago, he promised to pass one reform each month — a pledge he has not been able to fulfill because of a fragmented Parliament and continued resistance from trade unions and business associations.

The Situation in Europe's Core

Spain, Italy and Greece are on the eurozone's periphery, but the situation is not much better in the bloc's core. The French government recently disclosed that unemployment levels will not decrease this year and most forecasts indicate that France will see only marginal growth in 2014. This economic crisis has led to a government crisis because members of the ruling Socialist party disagree on how to stimulate the economy.

At the moment, French President Francois Hollande has the power to resist a political crisis within his government. He will suffer considerably more, however, if unrest increases in the streets. With the end of the summer holiday season and the onset of winter, this will likely occur as strikes and protests return in the coming weeks and months. And much like in the Continent's periphery, the combination of economic stagnation and lack of trust in traditional elites has led to a significant uptick in the popularity of the Euroskeptical National Front party.

Germany has a more stable economic situation than France, but the German government is also worried that economic growth will slow down in the final months of 2014. The economic sanctions imposed on Russia by the European Union to push for an end to Moscow's support for separatists in Ukraine have left German companies and consumers increasingly worried about the long-term impact on the German economy. Even if most of the current sanctions do not affect Germany directly, the uncertainty about the future itself continues to have economic consequences on the country.

The German government is under mounting pressure from France and Italy to support European Central Bank measures to generate inflation and boost domestic investment. This is something Germany does not want to happen, preferring to stick to economic reforms to address the crisis and resist intervention to weaken the value of the euro. Berlin was counting on economic growth to return to Europe to ease this pressure, but growth has been limited and inflation rates are declining. Because of this, Germany will eventually support additional measures from the European Central Bank, including quantitative easing.

Like its neighbors, Germany is also feeling the political repercussions of the European crisis. The Euroskeptical Alternative for Germany party received 9.7 percent of the vote in regional elections held in Saxony on Aug. 31, giving the party its first seats in a German state parliament. Two additional German regions, Thuringia and Brandenburg, will hold elections Sept. 14, and Alternative for Germany will probably enter those regional legislatures as well.

To a certain extent, geography explains Alternative for Germany's regional gains. These areas all used to belong to the communist German Democratic Republic and to this day remain less developed than regions in the west, experiencing high unemployment, significant emigration to the west and growing immigrant populations from the newest EU members in Eastern Europe. This makes them a fertile ground for anti-establishment parties. Alternative for Germany, which was born as an anti-euro party, has adapted its rhetoric to include issues that are important in these regions, such as crime and immigration. This has enabled the party to grow in the east and garner more support from far-right voters.

The Future of Anti-Establishment Parties

Although Podemos and Alternative for Germany have almost nothing in common, they share a key feature: Both signal the growing gap between Europeans and their traditional leaders. The parties' political platforms, though, reflect the conditions of their particular nations. Podemos focuses on resisting EU-imposed austerity policies that are unpopular with the Spanish public. Alternative for Germany campaigns against the euro and immigration-related crime. Like their predecessors, the French National Front and the Italian Five Star Movement, these young parties have come to thrive against the backdrop of the economic crisis and present attractive alternatives for voters who have lost faith in mainstream parties.

In most European countries these parties are not quite strong enough to actually form governments. They are, however, increasingly affecting domestic policy and shaping the political agendas of moderate governments. Hours before the elections in Saxony, the German government announced plans to expel EU citizens found to be abusing Germany's welfare system. In Spain, the government is proposing an electoral reform to give additional seats to the party that gets the most votes in municipal elections, a provision that would benefit large parties and prevent smaller parties from forming government coalitions.

With the number of asylum seekers on the rise across the Continent and anti-immigration parties becoming more popular, this issue will generate more friction. In recent weeks, the government of the German region of Bavaria accused the Italian government of helping asylum seekers move from Italy to Germany. Similarly, British and French officials entered a debate over the situation of asylum seekers in northern France trying to cross to the United Kingdom. Asylum seekers became a campaign issue in Sweden ahead of Sept. 14 general elections. The anti-immigration Sweden Democrats are polling at 11 percent, a record for the party. This is forcing the mainstream parties to incorporate the issue into their campaign platforms.

Having gained influence, the next stage in the development of these anti-establishment parties is to gain access to power. Traditional parties have so far tried to prevent the rise of their new adversaries by changing electoral law or forming large coalitions with other mainstream parties. However, anti-system parties are becoming increasingly skilled at presenting themselves as acceptable political options for voters who are disenchanted by the elites.

These parties are still far from forming governments of their own, but their growth in popularity makes alliances with the mainstream parties increasingly probable. The main question for anti-system parties is whether such a move would weaken their popular support, since they would lose their protest profiles as they enter governments and have to make policy decisions. In any case, the growth of these parties will deepen the process of political fragmentation in Europe.

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