At face value, populist gains in Europe would suggest further political paralysis, delaying or derailing economic recovery. But that conclusion would be too simplistic. The rise of populism is beginning to drive the governing parties of centre-left and centre-right together in a forced alliance to implement reforms and sustain the European project. Indeed, the Franco-German alliance at the euro level might get a new lease of life and Italy might even deliver a stable reform-minded government.
The UK Independence Party (Ukip) is now projected to win 26% of British votes in the EU elections. In France, the Front National recently trounced the countrys historically predominant parties in local elections and is projected to make big gains in the European ones. In Italy, the populist Five-Star movement, which won a quarter of ballots in national elections last year, has pledged to shake up the EU. The True Finns and the Party for Freedom in the Netherlands successfully wave the eurosceptic flag in the north of the continent. The quasi-fascist Golden Dawn in Greece and Jobbik in Hungary are doing the same in the southeast. Nor is populism just a right-wing phenomenon: the far-left Syriza, founded only two years ago and already Greeces second-largest party, is just as opposed to the German-led euro policies as its extreme-right counterparts.
There are two concepts of Europe in conflict with each other. The first is the almost religious belief in Europe as doing away with the legacy of war and chaos, cemented together with economic benefits. The second is the vision of Europe as the worst of faceless globalism imposed by democratically unaccountable institutions and elites, which attacks the root and branch of national culture, traditions and well-being. It is the protagonists of the latter vision that are becoming a honed political force.
Current predictions are that a collection of anti-EU populists and nationalists might capture up to 150 of the new EU parliaments 751 seats. The socialists or Christian Democrats, the two blocs that have dominated the EU parliament since its inception, will remain far more numerous, but coalition-building in parliament will become more difficult, with neither of the blocs having an absolute majority.
It might be that the populists wont have the numbers to reject the budget or dictate the composition of the next European Commission. But the personnel decisions that have to be taken this year in Europe are particularly difficult: key appointments in 2014 include the president of the EC and a president of the EU itself. An unruly European parliament will demand its own pork-barrel arrangements that will make the selection of all the holders of such posts that much more difficult.
This is all negative news for the aspirations of further European integration and a clear barrier to reform of the eurozone. However, as Isaac Newton explained, every action has an equal and opposite reaction. Gains for populism in the euro elections will force the established and elitist forces that underpin the European project to work better together, both internationally and nationally.
More, not less
In France, there has been an apparently Damascene conversion by president François Hollande. In January and in a Mitterrand moment, Hollande began to espouse the German vision of European policy and sought to instigate both austerity and supply-side measures in France. A more solid Franco-German alliance based on the German model for Europe might be the result. In Italy a new centre-left leader, Matteo Renzi, might form a stable government to reform the electoral system and introduce economic reforms designed to rejuvenate a paralysed Italian economy.
Economic recovery is central to whether or not centripetal (integration) forces will prevail over centrifugal forces (populism and anti-euro) in 2014. There are signs of improving final demand both within and outside the eurozone. But ultimately, a weaker euro might be necessary to boost external competitiveness and raise inflation and so push through cost reductions more easily.
Populism might do well in the euro elections, but the reaction of the centre mainstream might well be to unite in delivering economic reform in Europe to sustain the European project.