Greetings from Austria, where a 90-second review of all these elections cut to an exciting case of a Mercedes driver who lost control and plowed into the window of a shop somewhere in Upper Austria (and where the polls are suggesting a frightening turn to the right among youth when they have their elections)
There are three big results for EU politics tonight. It is a truism of doubtful value that the German-French partnership is crucial to Europe. It is clear, though, that the German-French axis is crucial to the Eurozone. This means that the European Union might see a sharp policy change- something that came up in every conversation I had in Brussels this week.
If you go through the Eurozone states, there are a few firm German allies in austerity: Austria, Finland, and Estonia, above all. The Dutch used to be the preachiest, but they had a budget meltdown a few weeks ago and have a caretaker government (what is Dutch for schadenfreude?). There are countries whose pro-austerity politics are largely due to their impossible economic constraints- Ireland, Greece, Portugal, Spain and Italy are ready votes for an alternative to their current predicament, but they cannot propose a solution. Then there are countries that have never been particularly happy with austerian policies, but saw no room to maneuver, such as Belgium and Slovakia.
Once France defects, where does Germany stand? Estonia is a firm supporter of a hard Euro (at devastating cost to its own economy) but it’s just not enough. Furthermore, there isn’t much evidence that Germans, or Angela Merkel, want to be left alone with only a few camp followers in European politics. So once France defects, and “Merkozy” is no more, Merkel has a big problem. Even if Hollande, the new President of France, does not pick a fight, there will be no French support for the tough austerity policies.
Merkel’s situation is in large part determined by the extent to which she can persuade German voters that they should participate in things that look like bailouts. Germany is an aging country enjoying a boom largely financed by exports to China. An aging person with windfall income is well advised to save, and many Germans see their country that way. A hard working person whose income has been stagnant for decades might also feel disinclined to bail out a teeming family of ne’er-do-well relatives, which is how many Germans see bailouts.
Her party (the CDU) just barely edged out the socialists in a regional election (Schleswig-Holstein) which introduces our second theme- party system fragmentation. The liberal FDP made it into government, as did the Greens, the Left, and the Pirates (a vaguely anarchic party focused on rights to digital piracy). It is no kind of vote of confidence in Merkel, but then again the two big German parties (SPD and CDU) have been losing votes to other parties for years. More directly is the composition of the German upper house, which is (unlike the US Senate) composed of representatives of the state governments. If the CDU can construct a governing coalition, Schleswig-Holstein might continue to support her. If it can’t, and her coalition parties don’t get into government there, it hastens the likely setback for her of the coming elections in North Rhine-Westphalia, which will probably deprive her coalition of a majority in the upper house. She might well decide to call early elections and try for another grand coalition unhampered by the unimpressive FDP, according to chitchat in Brussels (am imperfect source). She might also be able to present Germany’s increasing isolation as a justification for policy change.
The Greeks, meanwhile, also had elections. They have no power of decision- more powerful countries than they, with better reputations, have no policy autonomy within the Eurozone. So their new election is interesting principally because it extends the theme of electoral fragmentation, and because it increases the chances of instability. Electoral fragmentation? It looks like the wildly irresponsible New Democracy will be the biggest party, followed by a left party opposed to Socialist compliance with austerity, followed by the Socialists. Just for fun, a hard right party will likely join the parliament. Not surprising for a country with a right to be dissatisfied with its politicians, but alarming and likely to produce unstable governments- with unpredictable policy consequences.
What is the way forward? In Brussels, the European institutions- especially the Commission- have made themselves the microeconomic policy arm of austerity. Commission President Barroso has become particularly identified with the idea that Europe will be saved from macroeconomic meltdown by the same microeconomic reforms that have been proposed since the early 1990s. But the Commission officials, as good a weathervane of European politics as any, have been working up proposals for “social investment” (so well developed that the better wired academics are writing about it), more money for the European Investment Bank, and less microeconomic reform of dubious value.
The really isolated players are not the Germany-Estonia axis- they are the Brussels-Frankfurt axis. Barroso’s Commission might be working up proposals for social investment, but he is personally wedded to austerity and liberal microeconomic reform and would be absurd if he tried to “pivot” to something more constructive. His Secretariat has established a tremendous amount of control over the Commission, writing most key documents in keeping with his agenda of austerian and liberalizing reform. The ECB, meanwhile, has been able to get away with not doing its job because the austerity coalition supported it (as in, Mario Draghi managed to look like a social democrat rather than the chair of the executive committee of the finance sector).
Now, what will happen if the austerity coalition behind Barroso and the ECB is weak? “Non-majoritarian”, i.e. undemocratic, institutions such as the European Court of Justice have a history of bowing to overwhelming political coalitions. With the support of Germany and France, the ECB was able to impose unrealistic costs of adjustment on half the continent. WIthout France, the ECB will be very exposed and might start to shift its views. If Germany also starts to feel isolated, or less enamored of the FDP, and shifts, then the ECB would have to really believe the things economists say about central bank independence- or quietly try to contribute to growth.
In short, a good night for Europe- especially if it means the ECB feels pressure to do its job.
Incidentally, al-Jazeera English has by far the best coverage on cable- my condolences to those in America who must suffer the inanity of American cable channels.