Perils Ahead in European Politics
European politics in 2017 were beginning to look stable in the wake of elections in the Netherlands and France, where voters rejected populist candidates in favor of mainstream pro-European alternatives. But recent developments in Italy, Germany, and Britain have injected new uncertainties and risks.
The latest polls suggest that President Emmanuel Macron’s “La Republique En Marche” (LREM) party will win the parliamentary elections later in June, improving the chances of approval for his ambitious labor and pension reform agenda, a positive development for France and the European Union.
The victory by German Chancellor Angela Merkel’s Christian Democrats in the recent North Rhine-Westphalia regional election all but guarantees her a fourth term later this year, but how she will govern is less predictable. She could try to form a majority with the Free Democrats, who are increasingly euro-skeptic, rather than continue her grand coalition with the Social Democrats. A three-way coalition would test the centrist position Merkel has steered in recent years, paving the way for bigger tax cuts and some rollback of domestic policies like the minimum wage. Merkel is likely to remain Germany’s dominant political actor, and the Free Democrats’ demands—despite their eagerness to join a government after four years of being shut out—are not likely to deter any new European integration measures under Merkel.
The Macron-Merkel meeting in Berlin has reinvigorated the traditional Franco-German axis, raising the possibility of changing the EU Treaty as part of new European integration steps. Changing the EU Treaty remains a formidable challenge. The political hurdles do not lie in France or Germany. But the advent of President Donald Trump could strengthen their hands in leading Europe as an independent foreign policy and military power, potentially strengthening the euro area architecture as Macron has advocated. A reelected and legacy-seeking chancellor and newly elected French president just may be able to strike a Kohl-Mitterrand style grand bargain.
In Italy, meanwhile, the political parties are heading toward approval of a new election system similar to the mixed German system, where half of seats are awarded based on contests in individual districts and the other half are distributed to ensure a proportional representation in parliament. Were this to include the 5 percent threshold for representation in parliament, most smaller Italian parties would be shut out of power. Also possible are requirements that a new government have an absolute majority in parliament, and for invalidation of a vote of confidence in the absence of a majority for another candidate. The polls suggest that only four parties—the populist Five Star Movement, the Northern League, the one-man Berlusconi-aligned Forza Italia, and the center-left Democratic Party under former Prime Minister Matteo Renzi—will make the 5 percent threshold, complicating coalition discussions. Some smaller parties might merge, however. Renzi, the only pro-European mainstream leader in this dynamic, could win. But a win by the Five Star Movement is more probable, given this system. Thus an electoral system designed to thwart populism could end up strengthening it. Renzi hopes to benefit from Macron’s success, and Trump could discredit populism for Italian voters. Yet the risks of populism in Italy remain considerable, though Italy will probably not go to the polls until the very end of 2017 or 2018.
The volatile situation in the United Kingdom, especially after the terrorist attacks in London in early June, introduces still more uncertainty in Europe. Even before the attacks, Prime Minister Theresa May’s poll numbers were dropping as a result of her erratic campaign performance, compounded by the debate over cuts to police forces implemented under May’s tenure as home secretary and the escalating attacks by Trump on London Mayer Sadiq Khan. The Conservatives are still favored to win relatively narrowly on June 8, but a hung parliament and months of messy coalition negotiations cannot be ruled out. A narrow victory would weaken the mandate she wants for negotiations over Brexit, making her politically dependent on her party’s most anti-EU faction. The risk is rising for a confrontation over hard lines taken by May and the EU-27 members. A hung UK Parliament or even a minority Labour government supported on a case-by-case basis by the Liberal Democrats and the Scottish National Party might even produce a much softer Brexit and possibly even a nonmember close association enjoyed by Norway.
© 2017 The Peterson Institute for International Economics