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Gold Price Trend Forecast Summer 2019

Europe: When the Unthinkable Becomes Possible

Politics / European Union Dec 04, 2014 - 10:42 AM GMT

By: STRATFOR

Politics

Europe's economic crisis is slowly but steadily eroding the political systems of many countries on the Continent. New actors are emerging and threatening the supremacy of the traditional players. Alliances and events that seemed impossible only a few years ago are now being openly discussed across Europe. On Dec. 3, for example, Sweden announced it would hold early elections, partially because of political moves from the far right. In Spain, the ruling center-right party is openly discussing the possibility of entering an alliance with its traditional center-left rivals to prevent a protest party from taking over. Key members of the European Union, including Sweden, Spain, the United Kingdom and possibly Greece, will hold elections in 2015. In most cases, these countries will see outcomes nobody would have thought possible in 2008.


Swedish Prime Minister Stefan Lofven announced the snap elections after his center-left government lost a budget vote less than three months after coming to power. Lofven's announcement was precipitated by a decision by the far-right Sweden Democrats party to support the opposition during a budget vote. Sweden's early elections, the first for the country in almost 60 years, will be held March 22, with the anti-immigration Sweden Democrats likely playing a central role. In Sweden's parliamentary elections in September, no coalition managed to form a majority government, but the elections were marked by the strong performance of the far-right party, which received 12.9 percent of the vote, up from 5.7 percent in 2010, when it entered parliament for the first time.

While Sweden is one of the fastest growing economies in Europe, unemployment remains above pre-crisis levels. More important, Sweden has the largest number of asylum applications per capita in the European Union. Last year, violent riots shook Stockholm's immigrant-heavy suburbs, revealing Sweden's struggle to integrate its immigrants into mainstream society. Opinion polls show that Swedes still largely support the idea of living in a country that is open to asylum-seekers, but they are also worried about the economic and cultural impact of increased immigration. If the Sweden Democrats hold their place as the country's third-largest party, they will probably become key in the formation of a new government. This would put a far-right party in a position of power in one of Europe's main economies.

Spain

Spain's general elections, which will be held in late 2015, will likely have an even greater impact on its political system. The country's enduring economic crisis and a series of corruption scandals involving the ruling party led to a dramatic rise in popular support for Podemos, a left-wing protest party that wants to renegotiate the European Union's debt and deficit targets and restructure the Spanish debt. Podemos was created less than a year ago, but recent opinion polls put its popularity at around 28 percent — above that of the mainstream center-right Popular Party and center-left Spanish Socialist Workers' Party, commonly known as PSOE. Podemos' rise in Spain has been so resounding that on Dec. 2, Popular Party chief Maria Dolores de Cospedal said her party would consider an alliance with PSOE in order to form a government.

PSOE rejected the idea, while members of the Popular Party had backed away from it by Dec. 3. However, Cospedal's statements highlight the extent of the threat to Spain's two-party system, which was created after the end of the Franco dictatorship in the late 1970s. Before the crisis, Spain's mainstream parties normally captured between 70 and 80 percent of the vote. The 2015 elections will probably mark the first time in modern Spanish history that their combined support falls below 50 percent. The situation is particularly awkward for PSOE, which recently moved slightly more to the left to appeal to some of Podemos' voters. The party has yet to decide whether it wants to risk losing voters to the left by siding with the Popular Party or risk losing moderate voters by siding with Podemos.

Greece

Greece offers an example of what Spanish politics could look like in the future. Like Spain, Greece had a relatively stable two-party system that saw the center-right and the center-left alternate periods in power. But the economic crisis led to the rapid rise of the left-wing Syriza party, which opposes the EU austerity measures supported by the mainstream parties. In 2012, it took two elections for the mainstream parties to form an alliance to keep Syriza at bay. In Greece, where political rivalries are old and deep, such an alliance would have seemed impossible before the crisis.

Greece will probably return to the center of the European crisis next year when the Greek parliament attempts to elect a new president. If the parliament fails, it will be forced to hold early elections. With Syriza still at the top of the opinion polls, it would be more difficult to keep the upstart party from power this time around. Syriza has promised to restructure Greece's debt, a move that would probably make financial markets nervous and generate uncertainty across the eurozone at a time when Europe thought it had found some stability. When the European Central Bank promised to intervene in financial markets almost two years ago, the European Union lost the sense of urgency it had in the early stages of the crisis. The European Union, and particularly Germany, chose caution instead of action. Should Greece generate financial turmoil in Europe again, the Europeans will have to go back to the negotiating table and discuss all the issues that have so far been avoided.

United Kingdom

Finally, Euroskepticism will also be a key player in the United Kingdom, which will hold elections in May. Britain also had a functioning two-party system before the crisis, making coalitions relatively uncommon. But the rise of the anti-immigration UKIP party is seriously threatening this system. A coalition between the Conservative Party and the Labour Party or an agreement between the Tories and UKIP both seem impossible for now, but either would be conceivable if no party wins enough seats to govern on its own.

The current norm in Europe would have seemed impossible only five or six years ago. Most people would not have believed that unemployment in Spain or Greece could go above 25 percent or that nationalist, protest and Euroskeptical parties would become key players in European politics. More important, most Europeans would never have thought that the survival of the European Union would be under such a serious threat. For many Spaniards, Greeks, Swedes and Britons, the transformation of their political systems may still seem unlikely, but for some a surprise is likely coming next year.

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