While the establishment may breathe a sigh of relief looking back at political developments and events in Europe - which was spared some of the supposedly "worst-case scenarios" including a Marine le Pen presidency, a Merkel loss and a Geert Wilders victory - in 2017, any victory laps will have to be indefinitely postponed because as Goldman writes in its "Top of Mind" peek at 2018, Europe"s nationalist and populist tide was just resting, and as Pascal Lamy, the former Chief of Staff to the President of the European Commission admitted earlier this year, "Euroskeptic politicians are largely following the pulse of domestic sentiment. The fact is that the public is less enthusiastic about Europe than it once was."
Echoing the sentiment by the europhile, Goldman"s Allison Nathan writes that while the Euro area’s most immediate political risks—i.e., populist or euroskeptic parties winning key elections this year— did not materialize, these movements have continued to gain traction.
In the Dutch elections in March, the far-right Party for Freedom performed worse than polls had once predicted, but still increased its share of the vote relative to the 2012 elections. It remains the second-largest party in parliament.
In France, concerns about the prospect of Marine Le Pen winning the presidency gave way to optimism over Emmanuel Macron’s reform agenda; nonetheless, Le Pen posted the best-ever showing for her party in a presidential race.
In Germany, Chancellor Angela Merkel’s CDU-CSU retained the largest number of seats in the Bundestag, but the far-right Alternative für Deutschland (AfD) entered it for the first time with 13% of the vote.
And elsewhere in Europe, populist parties on various parts of the political spectrum performed well enough to participate in government coalitions; indeed, an anti-establishment candidate in the Czech Republic recently became prime minister
Some other observations and lessons from recent European events in the twilight days of 2017:
The transition from campaigning to governing has proved difficult. Europe’s increasingly fragmented political landscape has made coalition-building challenging. In the Netherlands, it took over 200 days to form a government with only a single-seat majority. Similarly, German coalition talks with the Green party and the Liberal (FDP) party collapsed in November. But, after having planned to move into the opposition, the SPD—Merkel’s former coalition partner—decided at its congress last week to open talks with the CDU-CSU. Talks were set to begin this week.
Other sources of uncertainty remain unresolved. Spain continues to grapple with the standoff between Madrid and Catalonia; regional elections in Catalonia on December 21 will influence the trajectory of the situation. Meanwhile, the UK and EU-27 seem likely to agree to move past the first phase of the Brexit talks (covering separation issues). But in a setback for UK Prime Minister Theresa May, UK lawmakers recently voted for an amendment to the Brexit bill that will guarantee Parliament a vote on the final deal agreed with the EU.
The decline in political risk bolstered European assets, though fundamentals likely played a decisive role. The market-friendly outcome of the French elections dovetailed with a pick-up in European growth, supporting European equity markets. US inflows into European equities rose significantly but have since stabilized with the acceleration in growth and the decline in the risk premium likely behind us. Receding political risks also contributed to a stronger euro, which is up 12.5% against the dollar this year. Given the currency move, the SXXP is up roughly 7.5% in local terms and 20.6% in USD terms year-to-date.
Next, here"s what Goldman expects and will look for in 2018 and beyond:
A continuation of the populist pull. The socioeconomic and cultural factors driving public opinion are unlikely to dissipate. Indeed, they may come into greater focus if growth moderates on a sequential basis starting in mid-2018.
Constraints to further fiscal integration. Opposition to fiscal transfers within the Euro area makes incremental revisions to existing EU programs more likely than transformational change. Key to watch will be Macron’s credibility as a champion of integration, which will hinge on his ability to push through reforms in the face of political and economic constraints.
Risks around Italian elections set to take place in March. Polls show the largest populist party, the 5 Star Movement (M5S), leading with roughly 27% of the vote. However, the new electoral law and M5S’s unwillingness to join a coalition suggest a centrist coalition is most likely. Such a government, while pro-EU/euro, would likely struggle to implement reforms.
An eventual resolution of political issues in Germany and Spain. We believe Germany’s major parties will work to avoid new elections, given limited public appetite for a new vote and the risk of AfD gaining more seats in parliament. In Spain, economic and policy uncertainty could persist, but in our view, it is not likely to have lasting or systemic implications. Eventually, we expect a compromise that grants Catalonia greater autonomy within Spain.
A bumpy road to Brexit. Expect the UK and EU to eventually agree to a two-year “status quo” transition plan.
And finally, here is a map showing where the forces of populism are expected to remain strong - and grow - across the continent.
Two months ago, in Europe"s latest shocking, anti-establishment outcome, Austria"s 31-year-old Sebastian Kurz became the world"s youngest leader after his conservative People"s Party won the Austrian National Council elections, making him Austria"s youngest Chancellor in history, while the establishment Social Democrat party suffered its "worst result since Hitler rule."
Sebastian Kurz and his girlfriend Susanne Thier
And now, two months later, in a double whammy for Europe"s outraged liberal establishment, the anti-immigrant Freedom Party of Austria (FPO) - which finished third in October"s elections with 26% of the vote, less than a percent behind the Social Democrats, has joined a coalition government with Sebastian Kurz and his People’s Party (OVP). The agreement between the People’s Party and the Freedom Party, which is returning to government after more than a decade"s absence, was struck on Friday, the two parties’ leaders, Sebastian Kurz and Heinz-Christian Strache announced in a joint news conference.
Austria"s president approved the new coalition on Saturday, two months after inconclusive elections. According to BBC, the coalition government makes Austria the only country in Western Europe to have a far-right party in power.
Sebastian Kurz and Freedom Party chair Heinz-Christian Strache
Introducing the new government, and the 180-page document setting out its agenda, Mr Kurz said the two parties had agreed "on a clear pro-European outlook". Meanwhile, Strache, who in January advocated a law similar to the ban on Nazi practices to be introduced against “fascist Islam,” spoke about “mutual appreciation” with Kurz, adding that they share “the responsibility for our homeland Austria and for the people in this country.”
While the two parties have yet to unveil the details of the coalition agreement, some of the key points that will shape the next government have already been discussed: among them is a further crackdown on migration
“We want to reduce the burden on taxpayers ... and above all we want to ensure greater security in our country, including through the fight against illegal immigration,” Kurz said.
And while the FPO will be the junior coalition partner, it has already secured several critical posts in the new cabinet. Party leader Heinz-Christian Strache will be vice-chancellor, while his party colleagues will run the ministries of the interior, defense and health and social security. Specifically, Herbert Kickl, will be the new iterior minister: the party"s general secretary and campaign director, 49, was a speechwriter for the late party leader Jorg Haider and is a close confidant of the current leader, Hans-Christian Strache.
For one, the sweep assures that any and all benefits for migrants will be eliminated. To be sure, the opposition has expressed concern that the police and the security apparatus are now all firmly in the hands of the Freedom Party.
Separately, the new foreign minister will be Middle East expert and writer Karin Kneissl, who is not a Freedom Party member but was nominated by the party, which to some suggests that the Freedom Party now effectively runs Austria. At the request of Austria"s president, the posts of justice minister and interior minister would not be held by the same party, Mr Kurz said.
Today"s crowning success of the far-right Freedom Party, which gained 7 percentage points on the previous elections, come amid a backlash to the immigrant wave that swept Europe in 2015 in the aftermath of Angela Merkel"s now defunct "open door" policy. The party"s hardline anti-immigrant stance emerged after Austria was overwhelmed by a wave of refugees fleeing the US-stoked proxy war in Syria.
Since 2015, the Alpine country took in some 150,000 asylum seekers, which accounts for over 1 percent of its population, one of the largest shares per capita alongside Sweden. The signs of the growing popularity of the far-right was evident in December last year, when Freedom Party candidate Norbert Hofer’s bid to become modern Austria"s first far-right president was only narrowly defeated in a neck-and-neck contest with centrist Van der Bellen.
And so, with Austria set to form a right-wing government, institutionalized opposition to Europe"s liberal “open door” policies on migrants is no longer restricted to the EU"s eastern territories. Poland, Hungary, the Czech Republic and Slovakia, with their own conservative governments, remain staunchly opposed to the EU relocation scheme and refuse to take in a single refugee. Now, with Austria joining the "resistance", the anti-migrant wave have officially broken into central Europe.
And now, we await Europe"s response: when the Freedom Party last entered a coalition in Austria in 2000, the country"s fellow EU member states froze bilateral diplomatic relations in response. While they were lifted months later, such measures are unlikely to happen again, as resurgent populist groups have been promoting anti-immigration and eurosceptic agendas across much of the EU, and the last thing any other establishment party wants is to experience a similar revolution in the top political echelons.
The chaotic trading in cable continues, this time spiking to the upside after Bloomberg reports that the EU and U.K. have reached an agreement on the sensitive issue of the role of the European Court of Justice after Brexit, according to two people familiar with the matter.
The agreement on the court leaves the Irish border as the only obstacle to talks moving on to the future relationship.
As a reminder, EU leaders are due to decide whether talks can move on at a summit on Dec. 14-15.
Despite the turmoil, majorities in most countries feel they have benefited from EU membership. According to the European Parliament, 90 percent of people in Ireland feel their country"s decision to join the EU has paid off.
Back in 1973 before joining, Ireland was struggling to find its feet internationally amid strong economic dependence on the United Kingdom. However, as Statista"s Martin Armstrong notes, in the years since it became an EU member, Ireland transformed its old antiquated and agriculture-centered economy into a modern one thriving on hi-tech industry. The European Commission has estimated that Ireland’s net gain from EU budgets has amounted to an impressive €44.6 billion since 1976.
Malta and Lithuania are close behind Ireland with 89 and 88 percent of people agreeing that EU membership has paid off for their countries.
In Greece and Cyprus, people are far more pessimistic. 48 percent of Greeks and 45 percent of Cypriots feel they have not benefited from EU membership. Italy had the lowest level of agreement with only 39 percent feeling EU membership has paid off.
Have you ever heard of Deutsch Jahrndorf? No? I don’t blame you. The tiny Austrian village, which is situated four miles from the Danube, is utterly unremarkable, except for the fact that it sits on the border of three countries. To the east is Slovakia. To the south lies Hungary. As such, within shouting distance of one another, live three peoples speaking completely unintelligible languages. Austria belongs to the West Germanic language group, Hungary to Finno-Ugric and Slovakia to West Slavic.
I thought about the exquisitely rich tapestry of European languages, cultures, customs, and nationalities as I watched the sad spectacle of Spanish riot police and Catalan separatists confronting one another on the streets of Barcelona. How on earth can the European Union unite that which history forced asunder?
The Folly of the EU
The European Union, French President Emmanuel Macron has recently declared to almost universal acclaim, needs more unity, including the creation of “a eurozone budget managed by a eurozone parliament and a eurozone finance minister”.
The need for the centralization of power in Brussels is, apparently, the lesson that the EU establishment has learned from the outcome of the British referendum on EU membership. Meanwhile, in Catalonia, millions of people have set their sights on independence from Spain. Foremost among their complaints is that the Catalan budget is influenced by Madrid.
Independence, the Catalans feel, will rectify a grave injustice occasioned by the French capture of Barcelona in 1714. The conqueror, Duke of Anjou, became the first Bourbon king of Spain under the name of Philip V. His descendant, Philip VI, is on the throne today. In Europe, ancient lineages last as long as ancient resentments.
Therein lies the conundrum of European unification.
On the one hand, people throughout much of Europe desire greater autonomy. Madrid has the vexing problem of the Basque Country to worry about as well as Catalonia. In Italy, Padania and South Tyrol in the North don’t feel like they have very much in common with the Mezzogiorno in the South. Corsica does not want to be French and Britain has only recently revisited a territorial arrangement that dates back to 1707.
On the other hand, every separatist movement in Europe declares its support for the project of European unification. But, how likely is it that people annoyed by Madrid, Rome, Paris, and London will be happy to have their affairs decided upon in Brussels? Will the Catalans, resentful of subsidizing farmers in Andalusia, quietly have no problem with subsidizing Polish peasants in Lower Silesia?
How Did It Go So Wrong?
Speaking of Brussels, it is both the seat of the increasingly dysfunctional EU and the capital of Flanders, which wants to separate from Belgium. It’s complicated.
Years from now, when the EU is either reformed beyond recognition or gone, historians will debate what went wrong and when. The Maastricht Treaty of 1992, which reinvigorated the British Eurosceptic movement that ultimately delivered Brexit, will be one of the obvious culprits. But I think that the problems of European integration are of an older vintage. Perhaps because it was signed by none other than Margaret Thatcher, the Single European Act of 1986 does not get the attention it deserves. Yet it was SEA that eliminated the national veto in a number of crucial policy areas and replaced it with qualified majority voting (QMV). Thatcher acceded to this new arrangement, for it was meant to break down intra-European trade barriers and transform the fledgling “common market” into a freer “single market”. Unfortunately, the introduction of QMV also meant that, occasionally, individual nation states got outvoted on issues they cared deeply about. Accusations of “meddling from Brussels” grew.
To make matters worse, the SEA engorged the powers of the Commission. That proved to be a double-edged sword. On the one hand, the Commission went after the anti-competitive practices of nation states with gusto. On the other hand, it used its new powers to start over-regulating economic activity. The regulatory and protectionist impulses of the nation states, in other words, were replaced by regulatory and protectionist impulses at the pan-European level and Europe became less competitive vis-á-vis the rest of the world. Maastricht and the Lisbon Treaty sped up the excessive centralization of power in Brussels that was already underway and transformed the European Economic Community into the EU with its own flag, anthem, and currency.
To those symbols of statehood, President Macron now wishes to add a financial transfer union, which, he feels, is necessary to make a success of the single currency. On a continent inhabited by a multitude of diverse peoples with no shared identity, Macron’s proposal, if implemented, will surely prove to be the EU’s undoing.
The EU values political correctness more than jobs.
The result was a collapse in support for Angela Merkel, and the rise of AfD and FDP in Germany. Let’s not forget Marine Le Pen in France, Beppe Grillo in Italy, and the far right in Austria.
For the sake of political correctness, the EU is bound and determined to punish the UK for Brexit even though new studies suggest that a Hard Brexit Will hurt the EU More Than Britain.
The European Union will lose more than twice as many jobs as Britain after a hard Brexit, research by one of the world’s leading universities found as tough UK-EU divorce talks begin in Brussels.
Hard Brexit describes what will happen if the UK and EU fail to reach a divorce deal by 29 March 2019. Britain would revert to WTO tariffs on imports and exports to and from the EU rather than the zero tariffs afforded by membership of the bloc.
The return of tariffs to goods and services would cost 526,830 British jobs and 1.209 million jobs in the remaining 27 EU member states, according to researchers at Belgium’s University of Leuven, one of the top 50 global universities. The damage would lead to a 4.48% drop in UK GDP and 1.54% in EU GDP, researchers found.
Free Trade Benefits
As I have pointed out previously, a free trade agreement can fit on a napkin. Her is my proposal once again: “Effective immediately all subsidies and tariffs cease regardless of what any other nation does.”
The first nation that adopts that policy will see an enormous economic benefit.
Very few people fully understand free trade. Even fewer politicians understand free trade. One of the few who does understand is British MEP Daniel J Hannan.
Free trade is actually between individuals, not nations.
The following caption is correct.
Institute for Free Trade
On September 27, Hannan launched the Institute for Free Trade (IFT).
We want to use Brexit to boost global commerce. We have an International Advisory Panel made up of statesmen who successfully pursued liberalisation in their own countries, from Spain’s José María Aznar to Australia’s Tony Abbott. Brexit, after all, shouldn’t just be about having an engaged and global Britain; it should be about reviving a stalled world trading system.
Why does such an institute need to exist? Largely because, however successful free trade has been in practice, it remains counterintuitive.
In rich countries, people fear being undercut by lower wages. In poor countries, conversely, they fear being overwhelmed by superior technology. Logically, these worries cannot both be justified; and, in truth, neither of them is. Free trade between a rich and a poor country, as between any two countries, benefits both.
Excellent Set of Hannan Tweets
Support for the far Right is lower in the UK than almost anywhere in Europe. Brexit, contrary to what we were told, acted as a safety valve.
Hannan’s last Tweet is my favorite of the group. Why not a better deal for everyone?
The EU is a customs union, not a free trade union. It promotes clean energy but puts tariffs and restrictions on solar panels and countless other items.
After 18 months of study, $2,200 in tuition and three exams, Ewa Feix is now permitted by German law to bake two variations of cupcakes.
“Not pretzels, not Black Forest gâteau, not bread,” said Ms. Feix, a Canadian who moved to Germany in 2009. Becoming a professional bread baker entails a three-year apprenticeship and more exams.
Germany’s thicket of rules and standards shields roughly 150 professions from competition, from ski instructors to well-diggers. Stiff fines await uncertified practitioners. German authorities conduct thousands of enforcement raids each year.
Ridiculous EU Rules
There are a lot of claims and counter-claims over Ridiculous EU Rules but Business Insider investigated. Here are the ones labeled true.
Banana’s cannot be too bendy.
It is illegal to claim water hydrates you on a bottle of water.
Prunes cannot be promoted for a bowel function effect.
Turnips cannot be labeled “swedes”, except in one place.
Diabetics are banned from driving (passed but not enforced).
Eggs cannot be sold by the dozen, they have to be sold by weight.
In regards to prunes, the EU ruled “The evidence provided is insufficient to establish a cause and effect relationship between the consumption of dried plums of ‘prune’ cultivars (Prunus domestica L.) and maintenance of normal bowel function.”
In regards to eggs, they can be packaged by the dozen, but the package has to include the weight. This is nothing but needless red tape.
The UK does not need any of this madness.
Fair Trade is Unfair
In response to every article like this one, I get slews of emails and comments along the lines of “I support fair trade”.
Such arguments are presented by people who want to drive up prices or protect their jobs at your expense.
My inbox and comment box are filled with reader comments and emails telling me “China doesn’t play fair”.
As part of that allegation, many point out Chinese pollution. I’ve written about that many times myself. Yes, it’s disgusting.
Let’s assume for a second that China is the one and only nation that plays unfair, or if you prefer plays the “most unfair.” Let’s also assume China subsidizes its manufacturers.
Who Benefits, Who Loses?
The logical conclusion of such an arrangement is the Chinese government is robbing its people for the express benefit of citizens of the United States.
There is no other logical conclusion. To subsidize exports, every person in China has to pay a cost, via taxation, pollution or both.
The winners are US consumers.
Reader Stuki eloquently explained the math in response to one of my free trade posts. He writes …
In order for a foreign government to subsidize one sector, it must necessarily pull the money from others, rendering them less competitive. Conversely, by subsidizing steel, the Chinese government is indirectly subsidizing each and every industry that uses steel as an input, in the US and elsewhere. While simultaneously taking that subsidy back from their home market companies, in order to pay for the steel subsidies.
So, the net result is the Chinese government subsidizing a low value add, albeit politically well connected, industry at home, while disproportionately subsidizing higher valued add industries abroad. Any way you look at it, it’s a better deal for foreigners than for the domestic Chinese. Which shouldn’t come as a surprise, because, as Friedman has pointed out, the Chinese government is taxing it’s own people, in order to pay for free gifts to foreigners.
If we would only be so lucky…… Of course, the Chinese collectively aren’t nearly stupid enough to not understand that. So the whole “subsidize” gift we’re supposed to be getting from China is, in reality, nothing more than the figment of some congressman-on-the-take’s imagination, planted there by the lobbyists for whatever LBO shop happens to have bought the steel maker that paid for his campaign.
Problems with Free Trade?
There are no problems with free trade, but there are two rules that prevent free trade.
Every country wants free trade for exports
No country wants free trade for imports
“Fair Trade” is a concoction by industries that seek or need protection via tariffs and import restrictions, to the damage of everyone else.
It is absurd to have everyone pay triple for underwear to “save 500 underwear manufacturing jobs” but that is precisely what the “fair trade” advocates seek.
Steel tariffs, Trump’s current hot button, constitute a similar story.
Steel tariffs may protect a small percentage of jobs in the steel industry (at best), but that is at the expense of auto manufacturing, fence manufacturing, etc. jobs, as prices rise everywhere else.
Fair Trade Irony
Finally, think of all the trucking, shipping, and shelf-stocking, and refueling jobs lost when trade slows because of protectionism.
Ultimately, the only “fair trade” is “free trade”.
European Commission chief Jean-Claude Juncker delivered his annual state of the union address on Wednesday, in which he laid out his grand vision for federalist Europe, and urged European Union governments to use economic recovery (i.e., Mario Draghi"s nationalization of the bond market), the political weakness in the US and Brexit as "springboards" toward a closer union, built on an expanded euro zone and a pivotal role in world trade. The allegedly unintoxicated Juncker sketched out a vision of a post-2019 EU where 30 countries would be using the euro, with an EU finance minister running key budgets to help states in trouble.
Among the key proposals put forward by the EU Commission president were compulsory Euro membership for the remaining eight European states outside the bloc, for new countries to join the Schengen zone, plans for closer defensive cooperation leading to the creation of a European army in the next decade and easier ratification of EU-wide trade treaties with foreign powers. Tax and welfare standards would converge and Europe, not the United States, would be the hub of a free-trading world.
In short, a blueprint for a United States of Europe.
“The wind is back in Europe’s sails,” Junker told the European Parliament quoted by Reuters, citing economic growth and the easing of a succession of crises -- Greek debt, refugee inflows, the rise of eurokcepticism reflected in Brexit - that seemed to threaten the EU’s survival.
Juncker has also resurrected the idea of merging his own post with that of the President of the European Council, who currently represents the interests of its member state governments, saying it would be easier if “one captain was steering the ship.” Such as president would be chosen in an EU-wide vote. A powerful new EU-wide economy minister has also been touted, one which would have power to whip dissenters in line with a common EU vision.
In his best infomercial salesman immitation, Juncker urged Europeans to hurry, or else the generous offer may not last: “Now we have a window of opportunity, but it will not stay open for ever,” he said, emphasizing a need to move on from and even profit from the British vote to leave the bloc in 2019 according to Reuters.
Some promptly backed Juncker"s blueprint: German Finance Minister Wolfgang Schaeuble said that Juncker’s plan to build a closer European Union based on an expanded euro zone was largely in line with Germany’s vision for the bloc. The German also said that Juncker had discussed with Chancellor Angela Merkel his annual State of the EU speech in which he spoke of a vision of a post-2019 EU where some 30 countries would be using the euro.
“It is good that he is putting pressure (to expand the euro zone) but the preconditions (for joining the euro zone) must be fulfilled,” Schaeuble told the ARD broadcaster in an interview. “It is in fact so that EU countries who fulfill the preconditions become members of the euro under the Lisbon Treaty”. However, the German who in the summer of 2015 nearly kicked Greece out of the Eurozone, added that EU countries wishing to adopt the single currency should not do so before their public finances and economies are sound enough as they could face the fate of Greece, which had to be bailed out by the EU and IMF in 2010.
* * *
Desperate to put the Brexit humiliation in the rearview mirror, Juncker said that “we will keep moving on because Brexit isn’t everything, it is not the future of Europe," Brexit supporters promptly said his speech showed they were right to take Britain out of a bloc set on creating more powerful, central institutions. The most predictable opponent of the hour-long speech, met with stirring applause by a mostly zombified audience, was UK MEP Nigel Farage.
"The message is very clear: Brexit has happened, new steam ahead… More Europe in every single direction and all to be done without the consent of the people,” Farage told the floor.
“The way you’re treating Hungary and Poland already must remind them of living under the Soviet communists. All I can say is thank God we’re leaving because you’ve learned nothing from Brexit.
It wasn"t just the Farage: Juncker"s core proposal for countering what is known as a “multispeed Europe” by encouraging all states to join the euro and other EU structures was met resistance in both non-euro zone countries and potentially in Paris and Berlin, where the newly elected President Emmanuel Macron and about-to-be-re-elected Chancellor Angela Merkel are readying their own plans.
Poland’s Eurosceptic ruling PiS party, which is embroiled in a bitter legal fight suggested the plan is optimistic in view of the ongoing crisis with migration, unemployment, stagnation and terrorism. “We need to get the EU’s house in order before there can even be a discussion on centralizing even further,” said Ryszard Legutko, a PiS MEP.
Opposition also came from members of the European parliament’s left-wing coalitions.
“When I listen to [Juncker’s speech] with the ears of many people who feel left behind by the current macroeconomic policies that we have, then I have my doubts because he still pushes for free trade deals that basically are tailor-made for multinationals,” Philippe Lamberts, of the Greens-European Free Alliance group told the Daily Express.
However, the most focused and principled attack on Juncker’s plans came from Harald Vilimsky, of Austria’s Freedom Party, which prompted Juncker to leave mid-speech, and once again demonstrated the deep splinters within the core of the Union, splinters which make the integration Juncker is seeking impossible.
“What Mr Junker wants de facto is to force the European union into a single state, and we know that the euro is not a success story. The second thing Mr Junker wants is de facto to actually get rid of all the internal borders, we see 10,000, 100,000, millions of African and Arabs are going to be coming to our continent,” said Vilimsky, who serves as the vice-chair of the Europe of Nations and Freedom party within the European Parliament.
“They talk about having a defense union, but no we don’t want that. What we want is Austrians, we’re a neutral country in Austria, we do not want to participate in the defense union. The right road for Europe can only be the road where there is more democracy left to the people, more democracy left to the citizens where people can vote whether or not they want to have Schengen maintained or not, whether they want their borders or not. The vote has to be left to the citizen.”
Aside from his traditional adversaries whose opposition was expected, what was more troubling is that Juncker"s "grand vision" also appeared to get the cold shoulder from leaders of nominally pro-EU nations. “Juncker is a romantic. We all have our own style, but I am more pragmatic,” said Netherlands PM Mark Rutte in response to the speech, adding that those “too concerned with vision should visit an eye doctor.”
Danish Prime Minister Lars Lokke Rasmussen said he was against creating an EU-super-president, tweeting “Let’s not mix roles and competences. Need European Council President as voice of member states."
Meanwhile, Germany and France, the two foundational powers in the union, are preparing to submit their own plans for EU reform by the end of 2017, and while their current leaders remain in favor of the EU, it is unlikely that either will endorse Juncker’s federalism without a mandate from their respective electorates.
In short, Juncker"s speech like virtually everything else out of Brussels in recent years, was just more hot air.
Here I thought I was fixing to get some good and cheap insurance -- to finance my future ailments. WRONG. I"ll just die in the gutters, penniless, after spending all of my money on expensive treatments and surgeries.
The Australian foreign minister joined Reebok and the litany of liberals, "taken aback" by Trump"s compliment to France"s first lady. This is because liberals are genderless faggots, unable to conduct themselves as normal people within the human race.
Nigel Farage said Trump Jr. made a mistake by taking a meeting with the Russian lawyer, but quite literally "did nothing wrong."
Former Trump campaign advisor and army veteran tells media and liberals to dial it down -- someone is gonna get shot.
Lastly, CNN continues to get destroyed, one meme at a time. This one is the infield triple edition, top shelf stuff.
Lastly, in recognition of tonight"s Game of Thrones season premiere, I give you Donald Trump, the Game of Thrones edition.
The first day of official Brexit talks is over, and according to statements it appears to have been a useful session, even though the real work is only just starting. The highlights from Reuters:
UK SOURCE SAYS GENERAL MOOD IN FIRST DAY OF BREXIT TALKS WAS "INCREDIBLY POSITIVE", MADE "AWFUL LOT OF PROGRESS" ON MANY AREAS
UK SOURCE SAYS BOTH SIDES AGREED THE CLOCK WAS TICKING ON BREXIT AND NEED TO PUSH ON WAS IN BOTH SIDES" INTERESTS
UK SOURCE SAYS BRITAIN STOOD BY DEMAND THAT TALKS ON FUTURE RELATIONSHIP RUN IN PARALLEL WITH TALKS ON BRITAIN"S WITHDRAWAL FROM EU
BARNIER SAYS MEETING WITH DAVIS WAS IMPORTANT OPENING SESSION
BARNIER SAYS CLOCK IS TICKING FOR BREXIT DEAL
BARNIER SAYS WE MUST ENSURE BREXIT COMES IN ORDERLY MANNER
BARNIER SAYS PROTECTION OF IRISH GOOD FRIDAY AGREEMENT AND MAINTAINING COMMON TRAVEL AREA MOST IMPORTANT OF IRISH BREXIT ISSUES
BARNIER SAYS NEXT PHASE OF TALKS WILL BE ON FUTURE PARTNERSHIP
Among other things, the EU and UK have agreed on provisional dates for Brexit talks among the three negotiating groups, which are July 17, Sept 18 and Oct. 19, and will include talks on financial settlement and citizens" rights.
Reuters also notes that Britain has demanded for talks on the future relationship should run parallel with Brexit talks.
As noted earlier, here is a "simplified" summary of the ongoing EU-UK negotiations:
Commenting on the current state of the European experiment, George Soros warned the European Union has plunged it into an existential crisis as a result of "dysfunctional" institutions and austerity mandates, and will require the bloc to reinvent itself to survive. Speaking at the Brussels Economic Forum, the billionaire investor said the EU had "lost its momentum" as he urged policymakers to abandon hopes of "ever closer union" driven by a top-down approach from Brussels, a statement which will likely displease Germany.
"The European Union is now in an existential crisis," Soros told a Brussels audience. "Most Europeans of my generation were supporters of further integration. Subsequent generations came to regard the EU as an enemy that deprives them of a secure and promising future."
Just a day after Brussels published a paper mapping out its vision of eurozone integration, Mr Soros warned that the single currency area had become "the exact opposite of what was originally intended" according to the Telegraph.
Quoted by CNBC, Soros said Europe"s "reinvention would have to revive the support that the European Union used to enjoy." The reinvention would have to review past mistakes and explain what went wrong, and make proposals to make things right.
Soros welcomed a German idea to cut European funds aimed at reducing income inequalities at the regional level for those countries disrespecting the rule of law. Both Hungary and Poland, which are net recipients of the so-called cohesion funds, have been criticized by European institution for their weak standards with regards to the rule of law.
The billionaire also reminded his hosts that "the European Union was meant to be a voluntary association of like-minded states that were willing to surrender part of their sovereignty for the common good. After the financial crisis of 2008, the eurozone was transformed into a creditor/debtor relationship where the debtor countries couldn’t meet their obligations and the creditor countries dictated the terms that the debtors had to meet."
"By imposing an austerity policy they made it practically impossible for the debtor countries to grow out of their debts. The net result was neither voluntary nor equal."
He, correctly, said loss of trust in the EU has paved the way for support for anti-European political parties and said the goal of "an ever closer union" had to be abandoned.
"Now we need a collaborative effort that combines the top-down approach of the EU institutions with the bottom-up movements that are necessary to engage the electorate," said Soros and added that "instead of a “multi-speed” Europe we should aim for a “multi-track” Europe that would allow member states a wider variety of choices. This would have a far-reaching beneficial effect."
He urged the bloc to focus on three key areas - dealing with the refugee crisis, Brexit and "the lack of an economic growth strategy".
Fight Xenophobia and Hostile Powers
Predictably, the man who some have alleged was behind the great migration movement that sent 1 million mostly Syrian refugees in Germany in the past 2 years, Soros said Europe needs to overcome the current "existential crisis" by fighting together against the rise of anti-European sentiment, xenophobic feelings and surrounding "hostile powers."
“Externally the EU is now surrounded by hostile powers: Putin’s Russia, Erdogan’s Turkey, Sisi’s Egypt and the America that Trump would like to create but can’t,” Soros said.
He called for an update of European treaties to make the EU work better and allow a "multitrack" bloc where countries would have a wider variety of choices when it comes to integration.
Brexit
Discussing Brexit, Soros - who rose to prominence as the man who broke the Bank of England for his bets against the pound in the early 1990s - warned Brussels against punishing Britain in forthcoming Brexit negotiations and said Brussels should not get distracted with the upcoming EU exit negotiations with the U.K. and continue their work to regain the trust of EU citizens.
"Brexit will be an immensely damaging process, harmful to both sides. Most of the damage is felt right now, when the European Union is in an existential crisis, but its attention is diverted to negotiating the separation from Britain," he said.
He also said Brexit is likely to take "as long as five years" and that the EU should approach negotiations in a "constructive spirit" and should use Brexit "to transform itself into an organization that other countries like Britain would want to join", instead of seeking to punish Britain.
"The European Union must resist temptation to punish Britain and approach the negotiations in a constructive spirit. It should use Brexit as a catalyst for introducing far-reaching reforms," Soros said. "The divorce will be a long process taking a long as five years... During that time the EU could transform itself into an organization that other countries like Britain would want to join. If that happens the two sides will want to be reunited even before the divorce is completed."
Nigel Farage was interviewed by Tucker Carlson this evening to discuss the suicide attack in Manchester that killed at least 19 and wounded dozens.
Farage told Carlson, “we have been lulled into a slight sense of complacency,” refraining, however, from jumping to conclusions as to who was responsible for the attack.
He noted that Britains shouldn"t put their guard down, post BREXIT, saying "we"ve convinced ourselves that we’re in a better place than the rest of Europe on this.”
Farage pointed out that the bombing was a "direct attack on children... marks a new low in all forms of terrorism."
The nightmare of nightmares of the globalist elites and France’s political establishment has been avoided: as the polls had indicated, Emmanuel Macron and Marine Le Pen are moving on to the run-off election; Jean-Luc Mélenchon’s late surge in popularity did not suffice to make him a contender – it did however push the established Socialist Party deeper into the dustbin of history. That was very Trotskyist of him (we can already picture a future Weekly World News headline: “French socialists discover giant alien dust mites”).
Lateral entrants to the business of avenging the disinherited, leavened by strawberry cake.
Around three micro-seconds after the election results became known, the entire French and European political elite immediately announced its undying support of Emmanuel Macron, with only a handful of “populist” parties outside of France saying that they were rooting for Marine Le Pen.
Just to clear this up beforehand, Ms. Le Pen may be the terror of the establishment, but she is just as statist as her competition was and is – in some respects probably more so. The run-off election is between two central planners (or at least “third way” proponents), each one of whom believes to be in possession of the “better plan”.
First round election results: the distribution of support between Ms. Le Pen and Mr. Macron reminds us a bit of the 2010 election map of Ukraine, which showed a similar East/ West split (see “Mapping the Conflict in Ukraine” for more details on this). Amazingly, Hamon didn’t even win a single department – click to enlarge.
There is no political constituency for liberty or anything remotely resembling classical liberalism (= libertarianism) in France. Moreover, in view of Mr. Trump’s recent magical transformation from putative swamp-draining rebel to slightly confused neo-con (who urgently needs a compass), it is clearly time to once again focus on the only thing that one can actually hope for in politicians, and that is entertainment value; luckily we have good news on that front.
Given unanimous establishment support for Macron, it was apparently concluded that the 2nd round voting ritual will be a mere formality, a kind of rubber-stamping exercise for the Brussels-approved candidate. Just to be safe, the French bureaucracy nevertheless mailed two ballot papers each instead of one to several hundred thousand Frenchmen living abroad so they will be able to vote twice.
That should produce a small haul of fraudulent votes for Macron, as it was decided to simply let the matter rest. Action will only be taken if fraudulent voting attempts are “detected” after the fact, which sounds like a difficult thing to do without Batman (in view of Le Pen’s anti-EU stance, most Frenchmen living elsewhere in the EU are bound to vote against her for personal reasons).
Second-round voting intentions, from the department of reasonable assumptions: after Geert Wilders “lost” the election in the Netherlands by enlarging the presence of his party in parliament by 33%, the conviction that Mr. Macron will deliver a Hillary Clinton-type landslide victory has solidified (“it doesn’t matter if the probability is 91%, 95% or 99%” – only climate science dazzles with more exactitude and prescience!). Admittedly, the recent French polls are probably more accurate than the US polls were, but we will still spend most of this post explaining why an upset could happen anyway – click to enlarge.
Confidence that the Brexit and Trump polling failures were non-repeatable one—off events seems indeed quite strong, judging from the party that was thrown in stock markets around the world. Even the sickly looking euro regained its footing.
To this we would point out the following: for a variety of unrelated reasons the euro was ripe for a rally regardless of the outcome of the first round election. Moreover, it simply doesn’t matter what the candidates say they want to do about the euro – not one of them is likely to abandon it.
Without a parliamentary majority it isn’t even possible for a French president to call a referendum on EU membership or the euro, as it would touch on a constitutional issue. We bet that would be just fine with Ms. Le Pen, since going back to the French franc would entail headaches any politician will want to avoid – unless a major crisis forces his or her hand (note: the FN has currently just 2 out of 577 seats in the National Assembly and Macron’s new party has so far not yet taken part in an election).
Buying already overbought and overvalued stocks is a different kettle of fish though – although the relief rally was not really unexpected, it still looks like mindless herding behavior. It makes about as much sense as buying gold due to rising geopolitical tensions, i.e., not much.
French stocks take off, as does the euro. The latter makes sense, the former doesn’t really – click to enlarge.
Money supply growth rates are currently slowing in every major currency area except China. M1 growth was recently still fairly high in the euro zone in absolute terms, but the ECB is beginning to “taper” QE as of this month, so a further slowdown is quite likely.
Narrow euro area money supply aggregate M1 (~equivalent to TMS) – the y/y growth rate has slowed from a high of ~14.5% to ~8.5%, with a further slowdown likely. That is usually not the best time to buy stocks, especially if they have already rallied for a while. Obviously, a Macron victory isn’t going to persuade the ECB to print more money – click to enlarge.
Rise of the Deplorables
The default assumption should be that Macron will indeed win the second round, but he does have some problems that may be masked in the polls by the “Bradley effect”. One advantage of Ms. Le Pen that reminds us a bit of Donald Trump’s campaign is that her voters seem more engaged and less likely to switch sides. The same cannot be said of Macron’s supporters.
Not only Macron’s supporters are less sure of their choice than Le Pen’s: note how fickle Hamon’s voters are. How certain is it that only 3% of them will vote for Le Pen vs. 70% for Macron? What they are telling an interviewer may not really be indicative of where they will put their cross in the contemplative quietude of the voting booth – click to enlarge.
In recent years security, immigration and terrorism have become increasingly important issues. It is fair to say that a great many French voters have by now migrated closer to Le Pen’s views on these topics (so to speak), in spite of the fact that the population of France once was one of the most tolerant in Europe.
After its election results fell intermittently to a low point from 2006 to 2008, support for Marine Le Pen’s Front National has grown noticeably. There seem to be more deplorables in France than previously suspected – click to enlarge.
That has changed significantly after the big surge in terror attacks over the past year (here is a list of French voter priorities posted by Mish in February; security and terrorism are sharing third place with purchasing power, right after jobs and government handouts). It should be no surprise that the Front National has become a bit of a fan favorite in recent years.
Last week’s terror attack in Paris elicited a comment by Macron that was faintly reminiscent of Marie Antoinette’s idea about people lacking bread. In an editorial for the Guardian he essentially told people to “get used to it”. That may simply have been a realistic assessment, or a less than ideal way of putting it. Still, when emotions are sufficiently stirred up, it may be taken as a sign that he won’t do much about it. That is quite different from Le Pen’s activist attitude.
Le Pen doesn’t seem to consider the problem “imponderable” – she would simply close the borders to immigrants from Isistan. Once upon a time this stance was widely decried as racist, but France has been on the receiving end of numerous terror attacks and many people’s attitudes have changed accordingly.
This doesn’t look like something one would want to get used to.
Macron: Hidden Entertainment Value
It may in this case be to Macron’s advantage that he frequently dispenses fascinating outbursts of verbiage that seem deserving of being entered into an incomprehensibility competition. He sounds at times as if he has a built-in postmodernism generator, or as if his speech hasn’t been decrypted just yet. People may therefore not be worried too much about what he says, since it is always possible that he has switched to philosophical bon-mot mode, and that stuff is generally beyond the ken of mere mortals.
It is incidentally also the good news we alluded to above, in the sense of entertainment to look forward to. We were previously fairly certain that only Marine Le Pen and perhaps the French Hugo Chavez would be able to deliver a satisfactory performance entertainment-wise. It turns out they have company.
After taking a closer look at Macron’s antics, we realized we had overlooked an incredibly gifted artiste. Because of this exciting discovery we can now look forward to the election with complete equanimity – any outcome will do. Here are a few remarks by other observers and critics commenting on his rare talent:
François Baroin: “He says nothing about nothing, and probably doesn’t think much more than that about it either.”
Unknown (to us, anyway) observer: “That is to say, a little elusive… it sounded hollow, in my opinion”
Another unknown observer (faintly reminiscent of Sherlock Holmes): “It is the most brilliant encryption system in history.”
Desperate woman standing in a fog bank: “I don’t understand… I don’t understand a word.”
Yet another anonymous observer: “This surpasses everything I could imagine.”
Marine Le Pen, speaking to Macron in a debate: “You have an insane talent, you end up speaking for seven minutes, I cannot even summarize your train of thought, you have said nothing, it is like the absolute void between the stars.”
What is it that so excites and at times perplexes his fans? We give you a few examples below (and will provide proof that he really said those things):
Macron at a feminism conference: “The identity is “A” equals “A”. There exist at least “A’s” and “B’s”. I didn’t want that “A” equals “B”.”
Macron during an interview: “You don’t want to live in a box, do you? I don’t. And so, our life always happens “at the same time”, it is more complex than what we want to reduce it to.”
Macron writing in “Le Journal du Dimanche”: “I have always accepted the vertical dimension, the transcendence, but at the same time, it has to be fully anchored in the immanent, in the material.”
Macron delivering a speech: “I, my life, my memories, they are made of childhood memories of my grandmother and that professor of philosophy, whom I have never seen… and yet, I have the feeling I know his face.”
Another Macron interview: “What constitutes the French spirit is a constant aspiration to the universal, that is, this tension between what has been and the part of identity… this strict ipseity, and the aspiration to a universal, that is to say, that which escapes us.” [ed. note: “ipseity” = “selfhood” – a term to be found – no kidding – in the “Dictionary of Untranslatables”; apparently French deconstructionist philosopher Jaques Derrida used the term ‘ipséité’ frequently in his writings. We incidentally also have to thank Derrida for books like “Specters of Marx” and sayings like “To pretend, I actually do the thing: I have therefore only pretended to pretend. And lastly, from another interview comes what we would at this stage call Macron’s piece de résistance… something for true connoisseurs, the high point – so to speak the Mount Everest of his pseudo-philosophizing and improbable reasoning. Just a few sentences of oddly poetic nonsense, declaimed with such moving sincerity one sits spellbound as the magniloquent imagery unfolds – until either the last sentence, or… We made the terrible mistake of watching the facial expression of the TV presenter, who listened to it live when it premiered and managed to preserve a deadpan, slightly bemused expression throughout, with a degree of self-control worthy of a Shaolin warrior monk. We probably sprained something in the process (the septum transversum? If Macron were in the US, we could sue him now). So here goes, Macron has the word:
“We all have our roots. And because we are all deeply rooted, there are trees next to us… there are rivers, there are fish… There are brothers and sisters…”
Stunning. We have in the meantime found out there is more… the man is a veritable fount of memorable quotes. Here is a video that shows him actually saying all of the above (in French, which somehow makes it even funnier):
The reincarnation of Socrates… or someone like him. Sort of.
What If?
We have to briefly consider what happens if the bête noire Marine Le Pen – unlikely as it seems – manages to pull a Trumpian upset. When Donald Trump won, the big surprise was that risk assets only went down for about an hour and immediately commenced to rally, a state they have been in every since. We don’t believe situation in France is going to be similar, if a surprise victory is achieved by the apparently greatly feared populist candidate.
The reason is mainly that market participants have decided to celebrate already. Prior to the US election, a mild undercurrent of “he might just pull it off” was always detectable. Also, the markets were a bit nervous, with volatility premiums high until D-day and the market weakening somewhat into election day.
This more recent flipping of the switch from semi-sobriety to full-on party mode is almost disrespectful by comparison. Anyway, it also tells us that the election outcome is widely regarded as predetermined and anything else is therefore going to upset the markets to varying degrees (in the short term).
She looks like she’s about to take off… can she actually fly? Her first round result was the best the FN has achieved in its history (see insert). Oh, and she’s wagging two fingers at once, for extra-emphasis. Finger-wagging by politicians is usually not a good sign, since it is most often employed when talk turns to perfectly harmless voluntary activities that the speaker wants to make illegal or regulate into near-death type catatonic compliance.
Conclusion
This is probably the last time we will write about the French election, unless the unlikely happens somehow. As we said though, that is a possibility that shouldn’t be dismissed. Other than that, we just hope that Macron continues with his creative impromptu wordsmith career.
* * *
Bonus Chart: Long Term Approval Bear Market
French presidents seem to have impressed their subjects less and less as time has gone on. Mr. Hollande saw his approval rating tumble to levels so low they were previously unimaginable; he didn’t even try for a second term as a result. To add insult to injury, at the time his approval rating hit its low it amounted exactly to 100 minus Putin’s approval rating. Wining the French presidency is evidently easier and more fun than actually governing.
As a final aside: five of seven post WW2 French presidents of France were “conservatives” – and yet, France is by many measures one of the most socialistic countries in the EU today, with government spending amounting to a breath-taking 58% of GDP (no wonder they are liked less and less).
The people increasingly disapprove… – click to enlarge.
Something hit me this week. The maps which came out on Monday and detailed the outcome of the French elections, were telling a story, and a familiar one by now. A story of deep division. There are a number of such maps now depicting the Brexit vote in the UK, the US presidential elections, and its French counterpart.
In all three cases they leave me wondering something along the lines of: ‘Are you guys sure you want to remain in the same country with each other?’ Because to me that is not all that obvious, and I think it’ll get less so as time passes. For instance in the case of France, the ‘ideological’ differences between Macron and Le Pen are substantial to say the least, they’re worlds apart.
And if you’re worlds apart, why live in the same country? Here’s that French map:
As you see, the country is sharply divided between west (Macron) and east (Le Pen). So much so that you wonder what these people still have in common, other than their language. There’s no doubt it’s also a dividing line between the richer part of the country, and the poorer.
Thing is, that same dividing line is visible in a similar map of the November 8, 2016 US election results, in a slightly different way.
In the US it’s not east versus west, it’s coast versus interior (flyover land). But the difference is equally clear and sharp. In fact, probably what we’re looking at is that France has only one coastline, while the US has two, and in both countries people living close to the ocean are on average richer than those who live more inland.
And in both cases there is no doubt that wealth is a deciding factor in dividing the nations to the extent that they are. We see that in an ‘urban versus rural area’ comparison as well. Cities like New York, LA and Paris are strongholds for the incumbent and establishment, the parties that represent the rich.
There can be no doubt that we’ll see more of that going forward. It won’t be there in smaller countries, Holland for instance is not nearly large enough for such dynamics. But Italy very well might. It’s always had a strong north-south-divide, and its present crisis has undoubtedly deepened that chasm.
Looking at things that way, it’s also glaringly obvious that Macron is Obama (and is Renzi is Cameron etc.). A well-trained good looking mediagenic puppet with a gift of teleprompter gab, fabricated and cultivated by the ruling financial and industrial world to do their bidding. Macron, to me, looks the most artificial of the crop so far, the Obama, Rutte, Cameron, Renzi crop. There will be more, and they will get more artificial. Edward Bernays is just getting started.
Of course there is also a strong move away from established parties. It is more pronounced in France -where they were eradicated at least in the presidential elections- than in the US or UK, but that may be more of a superficial thing. Trump and Bernie Sanders are simply America’s version of France’s ‘ultra’ right wing Le Pen and ‘ultra’ left wing Melenchon. And Trump is running into problems with the remnants of the established parties as much as Macron will if he’s elected president.
Anglo countries seem to take longer diversifying away from tradition than others, but they too will get there. The various deteriorating economies will make sure of that.
A third map is of the UK Brexit vote. Once again, a sharp division, and once again with a ‘character’ of its own. If you ignore Scotland for a moment, what you see is blue=poor and yellow=rich. Broad strokes, I know, but I’ve been doing that with the first two maps too. There are only a few pockets of yellow=rich=remain. But yeah, fewer people live there. Same thing as in the US and France.
That the whole Brexit thing should now be negotiated by the Tories is a cynical irony the country owes to its adherence to tradition. That is how that backfires, too little flexibility. How the UK will solve its many ignored issues is anyone’s guess. Will Scotland leave the no-longer-very United Kingdom? Will voters wake up in time to not present the Tories with a free hand to make the rich-poor divide even worse?
There’s one more, and more detailed, map of France, which shows even better to what extent ‘Le Pen country’ is eerily similar to America’s flyover land. It’s almost poetic, a poem about how countries fall apart, about centers that cannot hold. It also makes me think of a locust invasion, by the way.
Every French and European body and their pet hamster is presently telling voters in France to please please not vote for Le Pen, in a move that resembles similar calls against Trump and Brexit. And who knows, it might work this time around. The anti-Le Pen frenzy is even stronger than the others, and it has Marine’s crazy father to use as a warning sign.
But as these maps show, it’s not about Le Pen, or Trump, or Nigel Farage. It’s about people being left behind in ever larger numbers, susceptible to voices other than the ones they’ve known for a long time and who never listened to them. And nothing is being done to address these people’s claims; on the contrary, things are only getting worse for them.
I saw a headline today that said ECB president Mario Draghi’s “Stimulus Could Blunt Populism as Unemployment Declines”. There’s only one possible reaction to that: what happens when he stops his stimulus?
The growing divides that all these maps bear witness to will keep growing, unless someone decides that neo-liberalism has gone too far. But the only person who could make such a decision would have to be one who neo-liberalism itself has made rich and powerful. So don’t count on that happening.
Count instead on more Trumps and Le Pens and Sanders’s. And also on more Obama’s and Macrons for the rich to deploy to protect their power and hold on to their riches. Increasingly it would seem they have to limit democracy -even further- to remain in power. So count on that happening too.
But don’t count on all these countries surviving as sovereign nations. The chasms are widening too fast and too much.
Recent polls for Italian politicians supporting the eurozone and EU have collapsed.
Pro-Europe polls are highly likely to get worse as a further splintering of Matteo Renzi’s PD party takes place.
It is not out of question for Beppe Grillo’s eurosceptic Five Star Movement (M5S) party to achieve an absolute majority in the next election. However, please note that 40% is the threshold for a “majority”.
Foreigners often underestimate Italy’s ability to sidestep calamity. That said, the stakes are higher now than in 1992. Solutions may prove harder to find. The reason lies in the radically different EU and Mediterranean contexts in which Italy finds itself.
Some of contemporary Italy’s challenges appear similar to those of the early 1990s. The party system is once again in fragments. The ruling centre-left Democratic party (PD) split last month. The right is divided. The most popular opposition party is the anti-establishment Five Star Movement. Since November 2011 four prime ministers have taken office not because voters chose them, but because of a financial emergency, factional squabble, party coup and failed constitutional reform.
Matteo Renzi, the former premier and PD leader, suffered a blow this month when it emerged that Tiziano Renzi, his father, and Luca Lotti, a close political ally, had been caught up in a judicial probe into suspected graft in public procurement.
The most disturbing comparison between 1992 and the present day concerns the Italian economy, which is projected this year to be the slowest-growing in the eurozone. Public debt is more than 132 percent of gross domestic product. Unemployment is almost 12 per cent; the youth jobless rate is over 37 percent.
As a consequence, ever more Italian politicians question the merits of eurozone membership. So do Italian voters. In a Eurobarometer poll published in December, 47 percent called the euro “a bad thing” for their country and only 41 percent “a good thing”. This is the big difference with 25 years ago.
As long as the moderate left or right governs Italy, it may be possible to contain this disenchantment with the EU and the euro. But the PD’s fissures are the latest sign that the party system is cracking under the strain. The Five Star Movement is waiting in the wings.
PD Suicide
Via email, Eurointelligence comments on the costs of Matteo Renzi’s PD’s suicide mission.
We have been saying it for a while – political parties that preoccupy themselves with their internal divisions are electorally doomed. It is happening to the Labour Party in the UK, and it is now happening to the Partito Democratico. This tendency is now being picked up by the polls, which show the Five Star Movement ahead of the PD by five points. We are now at the point where it becomes increasingly improbable for the PD to regain power after the next elections. They cannot do it on their own, and they do not have natural coalition partners to help them. Even a hypothetical alliance between Matteo Renzi and Silvio Berlusconi would not, on its own, meet the 40% majority threshold for a coalition, and there is no way the two parties would enter the election with a pre-arranged electoral pact in the first place.
The Five Star Movement is now only 6 points away from an absolute majority that would allow it to govern on its own – assuming that the present electoral law for the chamber of deputies forms the basis of a new electoral system for the Senate. If one adds up all the non-extremist parties (and let’s count Berlusconi’s Forza d’Italia among them for the sake of argument), one would get to just over 40% – with the PD, Forza Italia, and the New Centre Right of foreign minister Angelino Alfano which only gets 2.8%.
Worse for the PD, its support will fall even more after the split of the party becomes a reality – which it will before the elections. The poll puts the hypothetical support for PD dissidents at 7.1%, which would reduce the PD’s overall support to under 20%. The new left, together with the old left, would have the support of close to 10%. All this shows that there can be only two election outcomes: either a fragmented parliament, with unstable and shifting coalitions, or a majority reign of the Five Star Movement. The Five Star Movement promises not to enter coalitions, and it will be interesting to see whether the party maintains that position after the elections.
On the issue that interests us the most – Italy’s future in the EU, and in the eurozone in particular – the picture is even more grim. The only two parties that unconditionally support Italy’s membership of the eurozone are the PD and the New Centre Right. Forza Italia is toying with the idea of a parallel currency, while the Five Star Movement has pledged a consultative referendum on Italy’s future in the euro. While this referendum can legally not end Italy’s membership in the eurozone, it would send a devastating signal to the outside world.
The Five Star Movement has its own share of scandals – for example involving the new municipal government in Rome, and the party is in an internal state of war over the candidate for the mayoral elections in Genoa. But none of that seems to stick.
Our conclusion is that the Five Star Movement is rational to avoid alliances with other parties, as this approach is paying off electorally. With that strategy in place, they will either gain a sufficient majority (over 40%) at the next elections, or in the one after that.
Italian Polls
Eurointelligence referenced a specific Italian poll that has been since superseded.
However, support for PD is clearly on the wane. Let’s take a look at all of the recent Italian Election Polls.
In only one poll since March 9 (clearly an outlier) did Matteo Renzi’s PD party come in first place. Moreover, PD has not yet split for polling purposes but it will.
I fail to see how M5s was “6 points away from an absolute majority that would allow it to govern on its own” as Eurointelligence states, but a coalition of eurosceptic parties totaling over 50% is easily at hand.
Support for M5S (Five Star Movement) + Fi (Forza Italia) + LN (Lega Nord), all eurosceptic parties, totals 54.5%in the most recent poll.
Forza Italia is former prime minister Silvio Berlusconi’s party.
If elections were held today, eurosceptic parties would easily hit not only a 40% threshold but a 50% threshold as well.
Whether eurosceptic could agree to form a coalition is another matter, but I suspect they would, especially if the alternative was a minority government led by PD.
Those who support the idea of globalism and strive for closer European integration believe the results of the Dutch election indicate the tide has been stemmed, with Eurosceptics and «populist» forces on the defensive. The buck stops here. This is the end of domino effect. The reshaping of Europe has been prevented. The pro-NATO, pro-EU establishment elites are to see glory days again.
Is it really so if you get to the bottom of it?
The future of Europe remains to be at stake, including the UK, Germany and France. Will the concept of United Europe exist in one form or another? Will Scotland stay in the United Kingdom? Will Germany and France distance themselves from the United States? Some of these questions could be answered sooner than expected.
This year may become a turning point with the votes to take place in Germany, France and, probably, Italy. In a month, France will have a new president and Germans will have a new parliament elected in September. The example of the Netherlands may have little influence on the votes.
Let’s look at the facts. Geert Wilders’ Party for Freedom made a substantial gain. It won 20 seats (of 150) according to the preliminary results, which is 5 seats more than in the previous election in 2012. The two governing parties got half as many seats as at the last election in 2012. The prime minister’s Party for Freedom and Democracy lost 8 seats and its coalition partner, the Labor Party (PvdA), lost 29 – an impressive defeat!
Actually, it’s a significant loss for those who ruled the country and a big gain (not big enough but still) for the right wing Eurosceptics led by Wilders. Many key points of the Party for Freedom’s program were «borrowed» by PM Mark Rutte’s People"s Party for Freedom and Democracy (VVD) and Christian Democrats. The popularity was raised due to the tough stance taken in the conflict with Turkey – something Wilders had been calling for. Actually, Prime Minister Rutte was riding to power on a wave of anti-migrant, anti-Islam sentiments.
The Sybrand Buma"s Christian Democratic Appeal (CDA) is all but certain to participate in the next governing coalition with 19 seats won (12, 5%) – an increase of 6 seats. The party has gained ground by adopting a tough line similar to Rutte"s on immigration, adding a focus on communal values and a touch of nationalism to tap voter concerns about Dutch identity. It has proposed introducing singing the national anthem in schools and mandatory community service. According to Sybrand Buma, Her Majesty Queen Máxima should renounce her Argentine citizenship (she was born in Buenos Aires). The CDA presence in government would ensure a conservative stamp on any coalition.
Media rarely mention the fact that another right wing anti-EU and anti-migrants party – the Forum for Democracy – took part in its first election to win 2 seats (1,8%) – not a bad start for a party created only in September 2016. It calls for restoring ties with Russia among other things.
The main result is opposite to what it appears to be at first glance. The outcome of the Dutch election conforms to the current trend – Euroscepticism is on the rise across Europe. The winning forces are often called populist but in reality they are anti-establishment movements which emerged as a result of voters being fed up with left or right windbags. People want them gone and the entire political landscape in Europe fundamentally changed.
Socialists have few chances in France and the chances of Angela Merkel becoming Chancellor again are dim enough. Martin Schultz is a serious rival to reckon with.
Newly founded or old anti-establishment parties continue to make gains. Perhaps not today, but they will come to power. In a couple of months Marine Le Pen may become President of France to radically reform European politics. Even if she loses, Le Pen will remain the most popular politician in the country who is able to win the presidential election in 2022. Artificial creations designed by experts for a particular task, like Emmanuel Macron, for instance, can’t stop it. Nothing can prevent the new wave of politicians from coming to power.
The Dutch election has not changed anything. It has failed to turn the tide. The EU continues to fall apart. The European integration will never be the same. More and more EU members challenge the existing pattern.
The March 16 vote in the Netherlands is far from being a harbinger of Eurosceptics’ movements fading away. Quite to the contrary, it has confirmed the trend – the Old Continent is going through changes. We’ll never have the EU we once knew. The process may temporarily slow down but it’s too late to stop it.
