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Of Secessionists And Populists: Across The Pond And Back Again

The stamina of the secessionists and the propitiation of the populists...

Last week, in “Of Rocket Men, Chinese Hegemony, And Populism Run Amok: 3 Visual Guides,” we brought you the following infographic from Goldman which gives you a figurative and literal lay of the political land in Europe as we kick off 2018:

Populism

In the simplest possible terms, the region navigated a political minefield in 2017.

From Geert Wilders to Marine Le Pen to the AfD, everyone who thought they might be able to capitalize personally by exploiting the increasingly polarized electorate gave it a go. The idea, of course, was to ride the wave created by the Brexit referendum and Trump’s victory in the U.S.

 

Trump’s campaign and the Brexit push both leaned heavily on nationalist sentiment and that sentiment itself relied at least in part on a heightened sense of xenophobia. Populist candidates used the influx of refugees from the war-torn Mideast to stoke fears of a coming culture war that, according to these political opportunists, would result in the Islamization of Western Europe.

Obviously, that was a ridiculous proposition, but it resonated thanks in no small part to a steady stream of propaganda. That propaganda push would reach epic levels of absurdity in 2016. For instance, right-wing websites at one point resorted to posting pictures of swimming pool etiquette signs (which, like swimming pool etiquette signs have always done, discouraged horseplay and literal ass-grabbing) as evidence that Muslims couldn’t be trusted around European women. Because no white man has ever grabbed himself a handful of ass at a swimming pool, right?

Of course it didn’t help that journalists, in their zeal to embellish a largely generic tale of radicalization, managed to transform the story of Abdelhamid Abaaoud (the ringleader of the Paris attacks) into the jihadist version of the Keyser Söze legend. He was blown to bits like Wile E. Coyote in the St. Denis suburb north of Paris on November 18, 2015, but the media had already managed to turn him into a larger-than-life character. That, along the Brussels attacks, allowed the specter of the cell he commanded to hang over European politics for a full year after his death.

Somehow, reason managed to triumph over fear in France and ultimately Marine Le Pen was trounced by Emmanuel Macron in the 2017 presidential election. Weeks earlier, Geert Wilders (the cartoonish xenophobe from the Netherlands) watched as his Party for Freedom put up a lackluster performance in the Dutch elections. As for AfD in Germany, they did manage to become the first far-Right party to enter parliament since … well … since you know. But they remain on the fringe.

One of the knock-on effects of this is that nationalist and secessionist movements not based on bigotry and hate have seen their political fortunes bolstered by the shift away from mainstream politics.

With that as the characteristically lengthy setup, here are some excerpts from Goldman’s look ahead to European politics in 2018…

Via Goldman

The stamina of the secessionists

Having secured “sufficient progress” in the first round of Brexit negotiations, the UK and the EU-27 will move on to discussions about the future in 2018. We expect a ‘status quo’ transitional deal to be agreed quickly, and announced in March. Subsequent discussions about the nature of the UK’s long-term relationship with the EU will likely prove more divisive. Vis-à-vis her own party, UK Prime Minister Theresa May faces a hard core of Brexit supporters suspicious of a soft reversal of the 2016 referendum result.

Vis-à-vis Brussels, Ms. May faces opposition to the idea that the UK can engineer a bespoke end-state arrangement. While we expect the UK to leave the EU’s Single Market in March 2019, we think it is unlikely that a comprehensive free trade agreement will have been negotiated before that deadline. This exposes the risk that Brexit negotiations unravel in anticipation, and financial market perceptions of Sterling assets sour. The passage of Brexit legislation will be further complicated by the Conservative Party’s fragile parliamentary majority at Westminster. We do not expect the Labour Party (led by Mr. Corbyn) to find itself contesting a snap general election in 2018, but we do expect the adverse economic effects of Brexit to intensify.

After a disputed referendum in October and formal regional elections in December, a fragmented set of pro-independence parties holds a slim majority in the Catalan parliament. Ultimately, we expect the question of independence to be resolved by virtue of a compromise involving greater Catalan autonomy within Spain. But the road to that destination may require constitutional reform. In the interim, we expect tensions between the national government in Madrid and the regional government in Barcelona to simmer through 2018, but without endangering Spain’s relatively robust economic recovery.

The propitiation of the populists

The electoral calendar is lighter in 2018 than it was in 2017. Nevertheless, the politics of populism will influence the composition of new coalition governments in Germany and Italy.

In Germany, last September’s federal election was notable for the underperformance of the CDU/CSU and the outperformance of the Alternative für Deutschland — at least relative to opinion polls in advance of the election. The AfD received the third-largest share of the vote, fragmenting Germany’s political landscape in the process, challenging mainstream approaches to immigration and Europeanism, and jeopardising Ms. Merkel’s ability to form a cohesive government. Cross-party negotiations are still ongoing. We expect another ‘Grand Coalition’ to emerge, but a breakdown in talks between the CDU/CSU and the SPD would raise the prospect of new federal elections in 2018.

In Italy, a general election will be held on 4 March. We expect a centre-left government to emerge, similar in spirit to the coalition currently led by Partito Democratico (PD). But the risks to the status quo are considerable. The Eurosceptic Movimento 5 Stelle (M5S) is leading in most opinion polls. A centre-right coalition between Forza Italia (the party of former Prime Minister Silvio Berlusconi) and Lega Nord (a right-wing movement focused on anti-immigration) is also in play. An alliance between M5S and Lega Nord cannot be ruled out.

Germany and Italy have come to epitomise the core-periphery distinction in the macroeconomics of the Euro area. As for their politics, however, both countries now face common populist challenges. When the dust settles, we expect the centrists to hold sway in 2018. But mainstream parties across Europe must offer answers to questions they have thus far preferred to defer — questions which arise from a fundamental realignment of political preferences rather than a temporary embrace of reactionary rhetoric.

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