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Centrist Contenders Arise in Europe

March 24th 2017

euro flags

The emergence of strong nationalism and Euroskepticism across Europe has challenged Europe's traditional political parties and threatened the continuity of Continental integration. But in the past few weeks, the political establishment has found itself under fire from a different direction. In Germany and France, which hold general elections this year, candidates who express dissatisfaction with the political status quo yet defend closer European ties have gained popularity. If those candidates are successful, immediate fears about the eurozone's future could fade, even though the underlying causes of the populist wave sweeping Europe would remain.

The Contenders

As France nears the first round of presidential elections in April, opinion polls show that centrist candidate Emmanuel Macron has pulled even with National Front leader Marine Le Pen for first place. Polls also suggest that Macron would defeat Le Pen in the election's second round, which will be held in May. Macron's rise (his support, which hovered around 20 percent in January, was roughly 26 percent in March) parallels the emergence of corruption scandals embroiling the former frontrunner, center-right candidate Francois Fillon (who dropped from around 25 percent to roughly 18 percent in the same period), and the movement of the Socialist Party to more left-wing positions. Macron, a former banker and graduate of the prestigious National School of Administration, seems to have succeeded at presenting himself as a political outsider, even though he briefly served as economy minister under Francois Hollande.

What is a Geopolitical Diary?

Macron's centrist rhetoric sets him up to attract votes from both the center-right and the center-left. At the same time, centrist candidates often struggle to present a coherent political vision, which could be a problem for his campaign. More important, opinion polls suggest that a significant portion of the French electorate is still undecided, and those who have so far expressed support for Macron, in particular, could change their minds before voting commences April 23. But the most important takeaway from Macron's candidacy is that he openly defends deepening the process of EU integration, an idea that isn't particularly fashionable these days. In contrast to candidates who promise to restore France's grandeur, Macron says that France should get its house in order (by reforming its economy) before it can join Germany as Europe's co-leader.

A similar situation is unfolding in Germany. In a matter of weeks, former European Parliament President Martin Schulz has energized the Social Democratic Party (SPD). Schulz's political career dates back to the early 1980s, but he spent most of the past two decades as a member of the European Parliament and had been little known by the broader German public before he was nominated in January to run as the SPD's candidate for chancellor. Since then, Schulz has portrayed himself as an outsider in German politics, and last Sunday, he won the party's official endorsement to challenge Chancellor Angela Merkel. Though he has been a part of the EU political system for decades, his distance from domestic German politics allows him to criticize Merkel's government, despite the fact that his party (but not him) has been a member of the government coalition for the past four years. Because of his political career, Schulz defends the idea of a federal Europe.

With promises to increase public spending, strengthen Germany's welfare state and reverse some of the market-friendly labor reforms that were implemented in the mid-2000s, Schulz seems to be luring back disenchanted voters who in recent years had migrated from the SPD to smaller parties. The SPD's popularity, which measured about 20 percent in January, has risen to around 33 percent.

As relative newcomers to their respective political scenes, Macron and Schulz are able to exploit their novelty while issuing vague promises. But as the election dates comes closer, both will face pressure to flesh out their proposals with specifics. In Schulz's case, regional elections in the states of Saarland (Sunday), Schleswig-Holstein (May 7) and North Rhine-Westphalia (May 14) will test whether his popularity can translate into election victories before the general election in September.

 

Popularity Is Not the Same as Power

The French and German electoral systems will make it difficult for Euroskeptic parties to access power. France has a semi-presidential system in which both the president and members of the National Assembly are appointed after two rounds of voting. This means that the National Front would have to win more than 50 percent of the vote in the second round to win the presidency or appoint lawmakers — a threshold that has previously proved impossible for the party to cross. In 2002, the National Front reached the second round of the presidential election only to face a crushing defeat at the hands of its moderate rival.

Under Germany's proportional electoral law, a coalition of at least two parties will probably be needed to form a government. This means that the performance of small parties such as the Greens, the left-wing Die Linke and the liberal Free Democratic Party will be crucial to determining whether Merkel will be reappointed as chancellor or whether Schulz can form a coalition against her. Should the small parties perform poorly, another grand coalition between Merkel's Christian Democratic Union and the SPD cannot be ruled out. At this point, the nationalist Alternative for Germany (AfD) party is unlikely to be given a role in the government because no other party would cooperate with it. The main question instead is the extent to which AfD will influence the agenda of the moderate parties.

Electoral victories by Macron and Schulz would create a scenario in which the eurozone's two largest economies are led by centrist and center-left governments that favor European integration. These administrations would probably be more lenient with Southern Europe when it comes to issues such as the enforcement of EU debt and deficit rules or the increase of EU-wide investment. A government led by the SPD could also be more reluctant to support free trade negotiations between the European Union and third countries, especially if it governs in an alliance with left-wing parties. This would mark a change of direction from the current administration in Berlin, which has made EU free trade negotiations one of its foreign policy priorities. But this is not a change of direction that would necessarily irritate the French, who have traditionally been skeptical of those kinds of negotiations.

But any German government would seek to protect Germany's wealth and alliances. Risk-sharing measures such as eurobonds (debt backed by the entire eurozone) or a common deposit insurance for eurozone banks would probably remain off the table even if the center-left took charge. Germany has the fiscal room to increase public spending — a measure that could lead to higher imports and a reduction of Germany's trade surplus — but it is not a given that an SPD-led government would jeopardize the country's sacrosanct policy of avoiding fiscal deficits. In addition, if Germany were to show flexibility with countries in the eurozone's periphery or push to increase EU-wide spending, it would set off concern from its northern partners.

Though a victory by moderate forces in France and Germany would temporarily allay doubts about the future of the eurozone, political risk will not disappear in the currency area. For example, Italian elections are scheduled for early 2018. Depending on the fate of its fragile government, that timetable could be accelerated. Like Germany, Italy has a proportional electoral system, which means that coalitions are needed to form governments. Three of Italy's four most popular parties are critical of the eurozone. So far, the Italian Euroskeptic parties are not exploring an alliance. But if they mend their rifts and make a deal to form a government, the political and economic conditions in Italy are ripe to present a serious threat to the continuity of the eurozone.

European populism and Euroskepticism are strengthened by weak economic growth, high unemployment, fears of the social and security effects of immigration, demographic change, and concerns among some sectors of society over the consequences of globalization. Unless those underlying trends weaken, the continuity of the eurozone will remain under threat, regardless of the results of elections in France, Germany and Italy. Should moderate forces remain in power, a massive crisis in the eurozone would be temporarily averted. But that does not mean that the consequences of a decade of economic and political crisis will simply fade away.


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