The Euro after the May European Elections

The electoral results testify to the failure of the policy adopted in the past ten years. A radical change is asked for and is possible. But the future of the EU remains uncertain.

One of the most obvious merits of a democratic regime is that the  usual cycle of elections allows the continuity or alternation of governments This is clearly evident in the case of bipartisan systems such as in the United States and historically, with some variations, in Japan, the United Kingdom and Germany, where one of the two main parties can alone or with the collaboration of a another party give way to government training.

The novelty that the European elections of last May have shown us is a significant turning point: for the first time in 40 years the two largest parties of the European Parliament, the Social Democrats and the Conservatives, no longer have an absolute parliamentary majority. In any case, this does not prevent the creation of a new majority by resorting to one or two European parties to form a new majority with a platform substantially oriented towards the continuity of the old policy.

Therefore, the new majority of the European Parliament, despite the change in political balance - having to add Liberals and Greens to the old alliance between Conservatives and Social Democrats - will fundamentally agree on the old basic European Union policy. Tancredi, protagonist of "Il Gattopardo", the novel by Tomasi di Lampedusa, is remembered for his famous statement: "If we want things to remain as they are, things will have to change". In this case the colors of the majority.

But do facts effectively provide us with a clear and definitive judgment? Are we sure about the continuity of the old European policy? The answer is indeed less certain than it may appear.

The result of the European elections was far from homogeneous. Of course, this is normal in an electoral consultation extended to 28 countries, in which people vote with an eye (if not both) on the conditions within their own country rather than on the global European framework. Yet the picture may become clearer and more enlightening by examining the specific results in relation to the four most relevant EU Member States: Germany, Italy, France and the United Kingdom. The results in these countries provide us with some interesting considerations that the overall figures tend to obscure.
To begin with, in Britain, Nigel Farage's Brexit Party,  born  just a few weeks before the elections, obtained 31 percent of the votes, becoming by far the leading party in Britain. The two parties that dominated the history of Great Britain – Labour and the Conservatives - got less total votes together, gaining 13.7% and 8.9% respectively.

We do not know if the United Kingdom’s exit from the E.U. will be decided by next autumn or if new negotiations with Brussels begin or if Great Britain decides to call a new referendum. But something new has already happened in the history of the European Union: the two old British ruling parties have been brutally defeated in the only country where the EU was clearly at stake.

In France, the most striking event was the far-right national party of Marine Le Pen overtaking La République En Marche led by Emmanuel Macron. The parliamentary majority is not affected by the European vote.
But the fact remains that the most ambitious protagonist of current European politics, who liked compare himself to Charles de Gaulle, achieved the worst election result among all the presidents of the V Republic after two years in the Elysée Palace.

In Italy, the results of the European vote cannot be subject to controversial interpretation. The two old parties that dominated the country in the last quarter of a century - Democratic Party and Berlusconi's Forza Italia - have been sidelined.If there was a surprise, it is the extension of the victory of the League led by Matteo Salvini, with 34 percent of the votes, and the strong retreat of the Five-star movement. However, the current government majority will remain stable as long as one of its components decides its end. In this case, probably due to the withdrawal of the Five-star, new elections will most likely continue to favor the League. In any case, Italy, the country that with great fervor has committed itself to the creation of the euro, is an involuntary testimony of the crisis that has hit the major countries of the eurozone.

On the other side, Germany, for the first time, will not be able to form government with the alliance of the two dominant parties of the past 70 years. The SPD with around 15 percent of votes has become a minor party in third place after the Greens, while CDU-CSU alliance with 28 percent  has had worst electoral result of its post-war history.

The countries we have mentioned are only four of the 28 that make up the EU - only three, if and when the UK eventually leaves its EU membership. But these four countries represent the vast majority of the 500 million EU citizens and the highest share of total GDP - together with the image of Europe itself on the international scene
Therefore, for the first time since its birth, the European Parliament will not have a pre-established homogeneous majority based on the partnership between the two dominant parties – the Social democrats and the Conservatives.

After May elections
The results of the European elections in the major countries are a clear testimony to the failure of eurozone policy. Its more ancient supporters, mainly the center-left parties, have been heavily defeated. At the same time, the European center-right parties have undergone increasing radicalization processes with the strengthening of the concurrent  far-right parties, such as in France with Rassemblement National, in Italy with the League, in Germany with Alternative for Deutschland - and in Spain with Vox.

The wave of right-wing parties has to be explained by the European policies supported by the complicity of the governing parties at national level. The resounding case of François Hollande is quite significant. After completing his first term, he  couldn’t run for the second term, being aware of the crisis of the Socialist Party destined to be reduced to a humiliating 7 percent of the votes. A dramatic sign not only of an electoral defeat but of a historical shift in the country that had been ruled by socialist leaders as Mitterand, Delors, Jospin - the true protagonists of the creation of the euro.
A situation already experienced in Italy by the Democratic Party that, after having won over 40 percent of the votes in the 2014 European elections, has lost more than half of them in the 2018 national elections.

A common fate befell the left-wing parties that had led the transition to the euro at the beginning of the century and had also led, at different stages, their countries. All of them, in the end, became its victims.And the defeat of the main center-left parties has heavily affected the SPD in Germany:  the party, which, under the leadership of Willy Brandt and Helmut Schmidt, had been at the center of European policy in the second half of the twentieth century.

The European elections in May reflected this profound dislocation of national parties and governments. Claiming that nothing has changed is a vain attempt to mask the change, its causes and its consequences. According to current analysis, this is the manifestation of a growing populist movement that destabilizes the old order But, if it were an indiscriminate populist reaction, it would still be necessary to explain the reasons. It seems increasingly clear that with the mask of populism there is a tendency to obscure the political processes that have profoundly altered the old framework.

                              European election results  in the last decade                         
                              The Two Main Groups in the European Parliament     
                 Seats 2009                          Seats 2014                             Seats 2019

EPP        265        35.7%                    221      29.4 %                        182      24.2 %

S&D       184         25.5 %                  191       25.4 %                       153       20.3 %

EPP - Group of the European People's Party (Christian Democrats)
S&D - Group of the Progressive Alliance of Socialists and Democrats in the European Parliament
The two main parties of the European Parliament lost about a quarter of the seats between 2009 and 2019 and the historic absolute majority in the EU Parliament.. 

In fact, the origin of the electoral dislocation must be explained considering the economic failure of the euro zone policy. Balancing the public budget in a situation of high unemployment is a self-defeating goal regardless of the currency that is adopted. The public debt of a country can be reduced only by  increasing the economic growth. And the growth rate derives in turn from the quantity and quality of the public investments, when the private ones languish, and enterprises reduce their activity or fail due to their indebtedness.

Eurozone has been in the past ten years the area with the less growth and , on average, the highest unemployment among developed countries This result was not fatal.  It has been the outcome of the neoliberal hegemony that has dominated the  eurozone. In this framework, the issue is not the single currency, but the subjugation of member states' economic and social policy to the authority of a democratically irresponsible technocratic body like the European Commission.

Ten years after the global crisis
Ten years after the start of the global crisis, the eurozone remains instead an area in crisis with the lowest economic growth, the highest average unemployment rate, the increase in social inequalities and the marginalization of the poorest regions.

The comparison with the United States is instructive.
The US suffered in 2008, in the last months of the presidency of Bush,  the worst crisis in its history, after the 1930s. The origin was not in the dollar but in the monetary and fiscal policy engineered in the previous years  by Alan Greenspan.  After less than two years of recession, the United has started the phase of growth that still continues, giving rise to the longest period of growth in many decades, while unemployment has fallen to the lowest level of the last half century .

Barack Obama, having arrived in the White House in January 2009, when the crisis raged and unemployment was going to hit 14 million Americans, immediately adopted a resolute monetary and fiscal policy and launched a public spending program of 800 billion dollars. Authoritative economists like Krugman, Stiglitz, James Galbraith considered the program insufficient. But it was, in any case, an important means to boost consumption and investments. In effect, it was initially feared that the crisis could repeat the disastrous events of the 1929. But the United States proved to be well aware of the lesson.

The lesson however, had not been learnt in the EU. Jean-Claude Trichet, president of the European Central Bank ( ECB), before Mario Draghi, feared an inflation risk and decided an increase in the interest rate.

We are recalling the American experience because it helps to understand the policy adopted in the eurozone: in short, a sort of suicidal policy. The member States were forced to reduce the budget deficit and the debt that the crisis had increased, sometimes more than doubling as in Ireland  and Spain. It was asked to block public investment and reduce social spending, putting salt on the wound. The reduction of public investments together with private ones, in the midst of the crisis, inevitably caused an explosion of unemployment up to over 20 percent in some countries like Greece and Spain.

So euro zone policy has become the vehicle of a deflationary policy that has helped to paralyze public economic activity, exacerbate the social crisis in the poorest regions and block public investment in sectors that are the matrix of technological progress.

Do the European elections mark the transition to a new phase that can identify the mistakes of the past and inaugurate a new euro zone policy?

Austerity does not cast its shadow only in the field of welfare and public investments. There is a dimension of austerity with a general and also more destructive character: the deconstruction of collective bargaining at national level aimed at covering not only wages but working conditions for each branch  of workers. National bargaining has been blocked or deeply weakened to make way for a fragmentary plant-level bargaining, where the forms and content of the negotiation, in a context of crisis, are easily in the hands of the company - assuming that there are companies willing to open negotiations that are not purely focused on reducing working hours or redundancies.

In other words, the trend promoted by European institutions, similarly to that of the International Monetary Fund, was oriented towards an Americanized labor relationship in which company bargaining in private sectors covered only about 7% of wage labor. weakening the unions and the power of negotiation, It is as that the crisis was not a problem to be faced, but an opportunity to be exploited to change by radically weakening the unions and the power of negotiation,
n essence, the eurozone social policy has become a very neoliberal policy, which could not have been implemented in a single member state without strong opposition capable of endangering the survival of the government. But that drew strength from the support of the Brussels authorities, behind which every national government could hide its responsibilities.

After the May elections
If the future is not clear, the judgment on the failure of the policies that have accompanied the euro in the last ten years cannot be hidden. The misunderstanding that has so far distorted the political debate on the eurozone depends on the fact that the right has split between opposite positions: on one side,  the full support for European Union policies; on the other, a skeptic or openly adverse position against them.

The center-left parties were instead characterized politically and ideologically as bearers of a supranational order that would assume the main political functions typically belonging to national sovereignty.According to their position, if it were difficult for a national government to implement market-oriented neoliberal policies in a single country, it would have been easier to carry them out at European level. But this ambitious stance turned out to be a chimera.

Elections for the European Parliament (2014 - 2019)
 Socialist and Democratic (S & D) results 
% of votes and seats in the three main Eurozone countries
Italy                        France                       Germany                 

                                    Votes     Seats            Votes     Seats             Votes     Seats             Total seats in EP

2014                             40.8       31                  13.9        13                  27,3        27                       71

2019                              22.7      19                   6,1           6                  15.8        16                       43
__________________________________________________________________ _________________       

Between 2914 and 2019 , Socialists and Democrats have lost 40% of the votes in the three main eurozone countries

The metamorphosis of the new eurozone policy led by the European commission under the aegis of Germany opened a new EU chapter.  A policy that we all knew in later years, notwithstanding the attempts to disguise it, essentially was a right-wing policy that, due to its ideological coherence , would have proved to be able of lasting and strengthening over time.

Canadian American economist Robert Mundell had prophesied that the eurozone would be extended to include 50 countries competing with the American economic power and, for the authoritativeness of his theory of "homogeneous monetary areas", with the advent of the eurozone in 1999 he was awarded the Nobel Prize .Unfortunately, a Nobel prize that the future would have not honored.

In the early years, the euro area had gone through a period of recession followed by substantial stagnation. In the middle of the decade there was a recovery of the economy. But it was abruptly interrupted by the crisis that broke out in the fall of 2008 in America, which involved European banks that had invested in the American financial market dragged by the real estate boom.

The current decade is closing with an exacerbation of the crisis. The average GDP growth was in reduction In the second half of the 2018 characterized  by the recession hitting Italy and  Germany. And while the current year is going to see still a poor growth in all the eurozone, particularly upsetting is the forecast for  Germany whose  growth will be limited to a few decimals of a point with a negative impact in all the area.

The sovereignty at stake
In summary, the combination of austerity and structural reforms is a key feature of European policy aimed at attacking the foundations of the political autonomy of Member States. And on this base the sovereignty of the national states had to be transferred to supranational bodies.But a national state deprived of sovereignty doesn’t exist. In any case, the EU, like the eurozone was made up by sovereign states. They decided to form the EU and a part of them to unify the currency. This was possible in the name of national sovereignty.

Giuliano Amato, former head of Italian government and currently member of the Supreme Court, known for his long unquestionable European faith, interestingly writes in this regard: “First of all, the European institutions will be more legitimate if it is given more space for national identities, because it is precisely the perception of an absence of recognition of national identities that creates alienation towards Europe ”.( Il Sole 24 ore, Europa, la fine dello status quo porterà un maggiore dinamismo -7th June, 2019).

The examples we have given are in fact a case of denial of national identity in  decisions that are strictly pertinent to national communities, and that should be transferred to the European Commission - a strange decision-making body unknown to the mass of European citizens, in which ten or more commissioners represent Member States that together have a population lower than that of France or Italy taken individually.

Thus, the only authority left to national governments (in this case the sovereignty re-emerges) is the power to decide on war and peace  - even though this is a field in which states normally take a position within the framework of international organizations, such as OTAN, of which they are part.

In effect, national sovereignty remains a prerogative that no country has given up. And it would be interesting to discover  that France or Germany have secretly renounced it. But the European Commission behaves towards the Member States as if it could dispose of their policies in all sectors of collective life, including those that belong to the historical identity of each country, as the issues concerning welfare state, core industrial policies,  economic measures for regions whose development is lagging behind, assistance to needy citizens.

It is a matter of common sense for those who believe they are living in a country founded on a democratic constitution that provides supranational agreements in defined sectors, but certainly not the alienation of national sovereignty.
But we are just seeing Italy under attack from the European Commission that menaces an infraction procedure for a budget deficit that could increase by a few decimals - something, moreover, quite normal in a situation of economic stagnation resulting from the international framework.

There are good reasons to argue that the problem is not the euro but the policy adopted by the eurozone under its banner - the policy of a technocratic organism, removed from the verification of democratic representativeness and supported by the interests of the economic and financial elites, and by the complicity of the governments of all colors.
With the May elections the protagonists of the old policy at national level have been  defeated and in some cases eliminated from the scene. According to devotees of the status quo, nothing has changed. An attitude that threatens to call into question the very existence of the euro, instead of acknowledging the bankruptcy policies that have been imposed on the eurozone, making it an area of economic and social crisis .

It’s difficult to predict the future after the May elections. But it is clear that the euro can be saved only by radically changing the policies that have made the eurozone an area of economic and social crisis. If politics is the art of change, this is the moment of politics.


Post scriptum

France and Germany have found an agreement to guarantee a government to the EU. France wanted to prevent Weidmann, president of the Bundesbank, from succeeding Draghi and has obtained the goal with the astute candidacy of Christine Lagarde, to whom it was difficult to deny consent after the long experience at the IMF. In return, Angela Merkel imposed her candidate Ursula von der Leyden as president of the European Commission. The fundamental Franco-German agreement has been confirmed.
Apparently, nothing should change. But with a closer look at the six major countries, change is a fact.
 In Germany, France and Spain, current governments do not have an electoral majority on the basis of European elections. As for the other three main countries, Great Britain is closer to the exit with Johnson, Italy and Poland have seen the strengthening of the current governments in disagreement with the policy of Brussels.

Antonio Lettieri
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