Goldman: Europe Must Break “Vicious” Cycle, Escape “Populist Trap”

I’ve got to admit, the Dutch elections got more attention from the mainstream media than I expected.

And that’s a good thing.

For months, I’ve been on a veritable crusade to wake readers up to the fact that the rise of populism and concurrent resurgence of 1940-esque nationalism in Europe both set the stage for Donald Trump and then subsequently benefited from his historic victory.

I’ve also been keen on highlighting the fact that Steve Bannon’s fingerprints were all over this from the very beginning. There’s been an incestuous, circular, self-referential dynamic at play since early 2015 between Bannon, Europe’s populist uprising, Bashar al-Assad’s struggle to regain his grip on Syria, and Russia. That isn’t some wild conspiracy theory. It was readily observable to anyone who documented it in real-time (as I did). Those interested in my retelling of how this unfolded are encouraged to read “‘Fuck The Facts!’: What Donald Trump Learned From Big Tobacco.”

As we get set to break down the results of the Dutch elections and parse those results for clues as to what to expect in France, consider the following chart and brief color out Tuesday from Goldman…

Via Goldman

Europe is caught in a trap. The rise of populism is both a cause and a consequence of this trap. On one side, mainstream governments inevitably find it hard to implement necessary reforms in the face of vociferous opposition from populist parties. Efforts to deregulate the labor market (and thereby expose previously protected workers from the consequences of international competition) draw the ire of the populist left. Transfers of sovereignty from the national level to European institutions (such as via banking or fiscal union) draw the ire of the populist right. On the other side, the inability of mainstream governments to implement the governance and economic reforms necessary to render the Euro area more workable means that macroeconomic performance suffers and social uncertainties and disruption persist and intensify, fueling the rise of populism. A self-sustaining vicious cycle of ever-intensifying tension can emerge. Breaking this cycle becomes central to the economic, financial, and ultimately political stability of Europe.