Tuesday, 8 May 2012

French elections expose splits in the EU

Germany will not work to change Europe's compact on budget discipline and rejects growth measures that increase debt levels, government spokesman Steffen Seibert said May 7. New negotiations of the fiscal compact are not possible, Mr Seibert said, adding that growth should come through structural reforms, not through new debt. German Chancellor Angela Merkel's good relationship with France will continue with French President-elect Francois Hollande, Mr Seibert says.

The European financial crises has caught up many nations threatening to seriously weaken states from Greece, Italy, Ireland to Spain. Not only have these countries had their economies collapse around them, they have very nearly brought their larger neighbours down with them.

The structure of the European Union (EU) has so far held the continent together but at the price of huge debt from focused quantitative easing (QE) plans. Strict austerity measures have essentially ceded control of entire countries to a central governing body; a highly risky, not to mention unpopular, plan.

No single country has remained completely immune to the dread of EU market volatility, but Germany and France have fared better than most. This is partly due to their fiscal policies and good relations with outside countries, but their good fortune mainly arises from geography.

Both Germany and France sit astride the North European plain, one of the most fertile and accessible areas of arable land on the planet. The tapestry of navigable rivers flowing throughout the long plain has made logistics simple and cheap over the centuries (waterborne transportation is orders of magnitude more efficient than compared to overland routes). Coupled with French - and especially German - strength in exports, the two countries have always been richer than the more isolated Mediterranean and Central European states.

The German powerhouse economy, one of the strongest in the world, has been a large part of the reason the Euro as a currency and idea remains strong today. Together, Europe is a huge economy, but since 2008 has begun to fracture the tenuous treaties and diplomacy. Hairline splits are starting to open again, exposing old wounds that could never be hidden forever.

Exit polls show French presidential candidate Francois Hollande defeated incumbent President Nicolas Sarkozy in France's May 6 presidential runoff election with 51.9% of the vote, France24 reported.  The transition between presidents will be fast, as Mr Hollande is expected to enter office before May 16.

First on his schedule of important meetings is a visit to Berlin to meet German Chancellor Angela Merkel. Discussions will surround how the current Franco-German leadership of the EU will continue and will be a chance for Mr Hollande to begin building the good relationship he needs with Ms Merkel, even though he remains a sceptic.

The German chancellor has expressed interest in discussing some of Mr Hollande’s election-campaign proposals around redrawing Europe’s fiscal compact treaty and his stimulus packages designed to increase job creation and economic growth.

A renegotiation of the fiscal compact treaty would not contradict Mr Hollande’s stoutly German-sceptic promises, but may place the new French president at odds with the Germans, who are not willing to seriously amend the treaty at a time when more delay and uncertainty in the EU could have very negative effects on the markets.

Much of the public reaction to the financial woes in the EU has been to criticise incumbent governments. Mr Hollande’s win can be seen as a result of the negative way in which the European public view the management of the crisis. Voting for the other side of the political spectrum, as Europeans are doing right across Europe and the United Kingdom, has only ushered in cosmetic changes. The underlying problems still remain because the processes which led to the crises have not been radically altered.

The election results in France highlight another emerging European trend. An unprecedented level of success for minority political parties is causing concern amongst Europe’s elite. Many countries have electoral ceilings that specifically limit such success from minor parties, but the public are pushing through those barriers with their support.

The French elections were not unusual given this trend. Marine Le Pen’s National Front, a far-right party advocating protectionism and heavy Euroscepticism, gained 17.9% of the votes. The popularity of her party is the strongest it has ever been and exposes the underlying splits beginning to occur even in one of Europe’s largest economies. The story is largely the same in the Lower Countries.

Unofficial exit polls from Greece's May 6 general election show the New Democracy party leading with 17-20% of the vote, Athens News reported. The Radical Left Coalition finished with 15.5-18.5 % of the vote, the Panhellenic Socialist Movement with 14-17% , the Independent Greeks party with 10-12%, the Communist Party with 7.5-9.5%, Golden Dawn with 6-8%, 4.5-6.5% for the Democratic Left, and 2.5-3.5% each for the Popular Orthodox Rally, the Democratic Alliance and the Ecogreens. Most of these are minority parties.

In the United Kingdom, last year’s elections also uncovered simmering discontent with the status quo. The Independence Party - another Eurosceptic and nationalist group - took votes away from the eventual winner David Cameron in much the same way as what happened in France yesterday.

Europe is struggling to contain and reconcile fundamental differences which have led to so many brutal wars in the past. The European Union was built to keep these forces in check. But the structure of the supranational organisation as a bandage for these tensions is slowly coming loose as the crisis deepens. The European elites still feel they can salvage a good chunk of the working EU organisation, but that may mean implementing harsher austerity measures on some of the more broken Lower Countries.

Actions of this sort are not going to be very welcome. They would stir up the long-standing and legitimate suspicion of hegemonic Northern European nations. However, the Lower states realise that their continued inclusion in the great European experiment depends largely on whether the Franco-German leadership can afford to retain them. Mr Hollande’s election doesn’t exactly answer their question yet, but the direction his government is heading is not likely to be encouraging for them.

Mr Hollande’s party is relatively traditional in its ideology compared to other advancing parties in the French parliament. And given the state of the crisis, an emergency that is only beginning to really start, the splits between traditional and more nationalist ideologies will become more pronounced in the future.

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