A political earthquake hit Europe in the European Union elections on Sunday night:
- For the first time since the War, mainstream parties were beaten in major countries
- In France, the National Front won 25% of the vote, with conservatives 21% and ruling socialist party only 14%
- In the UK, the Independence Party (UKIP) won 28%, with Labour 25%, and ruling Conservatives on 24%
- In Greece, origin of the Eurozone crisis, the far-left Syriza party won 26%, with the ruling party on 23% – and the neo-Nazi Golden Dawn on 9%
France’s Prime Minister rightly called it a “ shock, an earthquake that all responsible leaders must respond to“.
In the UK, coalition partners Liberal Democrats saw their vote slump to 7%, and they lost all but one of their MEPs. This may well herald a potential second earthquake, where the ruling Conservative party form an electoral alliance with UKIP for next year’s general election. This would create a clear threat that the UK would vote to leave the EU in the Conservative party’s planned 2017 referendum – by when Scotland may have voted for independence from the UK.
One cause of the earthquake is shown in the above chart, highlighting how youth unemployment now averages 25% across the EU. Very clearly, the supposed Recovery programmes put in place since the Crisis began have not worked.
The key issue now is whether policymakers will listen to the voters and change their approach. It is clear from the votes in Italy and Spain, where the ruling parties held their position, that voters do not really want the EU to disappear. But they want their leaders to connect with them on the real issues.
Hard messages have to be given about the choices ahead:
- Europe is an ageing society, and will not return to the constant growth seen in the BabyBoomer-led SuperCycle
- It is impossible for pension ages to remain at levels of a century ago, when life expectancy has risen 50% or more
- Education systems must be radically overhauled to give young people the skills required for today’s economy
- Energy costs must be reduced to affordable levels, with subsidies for wasteful vanity projects scrapped
Europe does not have long to make these choices. Voters will not continue to give the mainstream parties ‘one more chance’ forever.
The blog is by nature an optimist. And so it hopes that today’s leaders will rise to the challenge before it is too late. But it fears they will instead hide behind the illusion that monetary policy can somehow solve the real issues.
There is a great risk that the European Central Bank will unleash a major new stimulus programme next month. Yet as the blog argued recently in the Financial Times, deflation is inevitable with ageing populations. More stimulus would therefore solve nothing, and simply increase debt levels to even-more unaffordable levels.
The plain truth, seemingly obvious to everyone but policymakers, is that the voters want real dialogue and real change – not more money-printing designed to boost financial markets.
The risk for the future is obvious, with Germany’s anti-EU party gaining 7% of the vote. Germany not only cannot, but will not, pay the bills to bail out today’s failed policies.
Sunday’s results have caused a political earthquake. It is now up to EU leaders to make the hard choices necessary to set the economy on a new and more sustainable path. Doing nothing is no longer an option, if they want the EU to survive in its present form.