Europe

The EU’s future is far from secure

BY Jack Tagholm-Child   /  28 June 2017

Commentators have argued Emmanuel Macron’s victory in France, and Mark Rutte’s in The Netherlands, have reconsolidated the moderate Pro-European position – which appeared to be teetering – sweeping aside the anti-EU populism which had been centre stage in the French and Dutch elections. Whilst this may be true for the time being, as is so often the case with the European Union, fundamental underlying issues have not been addressed. There are, in fact, a number of reasons which make the EU still a very unstable institution. Specifically, two key EU bulwarks – France and Italy – as well as Greece, demonstrate that the EU is far from a solidly grounded entity.

Despite the Presidential election result, France remains a considerably Eurosceptic country. In the first round, 41.1% of the electorate voted for overtly Eurosceptic candidates: Marine Le Pen and Jean-Luc Mélenchon. While a further 19.9% voted for François Fillon, a candidate who originally had reservations about the EU’s current iteration and wanted to see reform before ultimately deciding he wanted to stay in the EU. What swung the election heavily in Macron’s favour was the historic reputation of Le Pen’s father and party. This sentiment overshadowed any concerns about the EU.

It remains to be seen how Macron will perform as President, but if the refugee crisis is not sufficiently dealt with, discontent with the EU’s ineptitude is likely to grow. Combine this with the emergence of a Eurosceptic candidate more palatable to the French electorate and you could eventually have a perfect storm for a Frexit.

Italy is also no longer a pro-EU safe haven. Beppe Grillo’s Five Star Movement has gained significant momentum. Despite Five Star’s setback in the recent local elections – which do not favour a party like Five Star, as the electoral system used encourages coalitions before the vote – it is still polling neck and neck with the PD (Partito Democratico/Democratic Party). One of Five Star’s key manifesto points is a referendum on the euro. However, EU law makes it clear no state can leave the Euro without also leaving the European Union as a whole. This scenario is made more probable by the poor state of Italy’s economy, which is likely to fuel even more EU discontent.

Recent economic news emanating from Italy has been cautiously positive, with 0.4% growth for the first quarter of 2017 and confirmation the Italian government will bailout Banca Monte Dei Paschi di Siena – to the tune of €20 billion. However, the Italian economy is far from robust. Italy’s national debt is now at 132% and Italy ran a structural deficit of 1.6% in 2016, with the EU commission forecasting this to rise to 2% in 2017. Growth remains sluggish, predicted at 1% this year. It contracted considerably in 2012 and 2013, shrinking 2.8% and 1.9% respectively, while only growing 0.7% in 2011, 0.2 in 2014, 0.7% in 2015 and 0.9% in 2016.

Combine this with the precarious situation the Italian banking sector is in following this latest bank bailout, and there is the prospect of the Italian economy quite easily slipping back into crisis. A global economic slowdown, or recession, for example, would put extra strain on the Italian economy, due to its inherent weakness. Steve Jakobsen, chief economist at Saxo Bank, thinks a global recession has a 60% probability in the next 12 to 18 months.

Such a slowdown is very likely to lead to further discontent with the euro, which is already widely considered to have played a large part in Italian economic woes by the Italians themselves. This will in turn increase the likelihood the Italian electorate will vote for anti-euro – and by implication anti-EU – parties in the Italian election which has to take place before the spring of 2018. A key difference between the French and forthcoming Italian elections will be  the debate around the euro, which the French have far less qualms about, as it has clearly benefitted their economy.

One should also not forget about Greece. Greece has suffered the longest and hardest of any of the European nations, with Germany refusing to relent on debt repayment terms which have been suffocating the Greek economy. Poland’s Foreign Minister has recently described Greece as “a de facto colony.” You can find Greek Eurosceptic parties on both sides of the political spectrum: SYRIZA and the Communist Party on the left, and the Independent Greeks and Golden Dawn on the right. With the 4th bailout of €9.5 billion being put on the table – and the Germans still hesitant about allowing debt relief, which the IMF has been pushing for – one wonders how much more the Greek people can take. At least they can be cheerful about the apparent rise in tourism this summer!

It would only take a Eurosceptic candidate to ascend to power in either France or Italy for the EU’s future to be put in considerable doubt, and if Greece were to leave at some point this would, at the very least, wobble the boat. French Euroscepticism in the most recent election was masked by a majority in France being wary of the legacy of the far-right Front National. Populism stills bubbles away potently within the French electorate. The Italians’ discontent with the perceived depressing effects of the euro on its economy could well manifest itself in an anti-Euro government coming to power – which would in effect be an anti-EU government, if it were truly serious about ditching the Euro. The EU is an institution which is not on stable ground, and is likely to disintegrate in the future. This is why it’s all the more important to Get Britain Out of the EU.

Jack Tagholm-Child is a Research Executive at cross-party campaign Get Britain Out