Continental Euroscepticism has not yet peaked: we could still see the collapse of the EU

Continental Euroscepticism has not yet peaked: we could still see the collapse of the EU

Chancellor Merkel and President Macron recently met in Berlin to try to hammer out a way forward on reform of the eurozone. Not unexpectedly, they failed to make progress. In the process they demonstrated why Macron’s much talked about push for a fiscal union is a mistake in the first place. Not only do Berlin and Paris differ deeply on what needs to happen next, but the recent Italian election showed no appetite whatsoever for such a fiscal union in Rome.

The deadlock comes as something of a blow to those who thought the EU was out of crisis. In 2017, after all, the eurozone returned to growth after years of recession. Macron campaigned for the presidency in France on a pro-European platform and won. Pro-Europeans dared to dream the revolt against the EU had peaked and that Europe’s economic crisis was over.

This was always to look through rose-tinted glasses. One EU Commissioner recently told me that economic times in Europe were good. This overlooks the huge numbers of people still unemployed, especially among the young; it ignores the stagnant or declining real wages being experienced by many; and it underplays the precarious nature of work even for those who do have jobs. It also betrays just how out of touch with the lived reality of many Europeans some members of the eurozone elite really are.

At best, the return of some modest growth offers but a breathing space and a window of opportunity to address fundamental economic weaknesses and inequalities in Europe while reforming the single currency to make it crisis proof before the next crisis hits. Macron and Merkel’s failure means there is now no realistic prospect that the opportunity for reform is going to be taken.

And even if the idea of a fiscal union were to take hold, the tight spending and reform conditions attached to it in Berlin would straitjacket mainstream European politicians of both centre-right and centre-left, leaving national politics in many countries largely devoid of economic content. In the name of saving the single currency economically, supporters of a fiscal union would destroy its viability politically by fuelling a popular revolt against it.

The Banking Union that is supposed to help separate the finances of governments and banks in the EU is also not being consistently and properly implemented, meaning that if a new crisis does come, taxpayers will once again end up on the hook to bail out failing banks. Only this time, many of their governments already have debts that are almost unsustainable, the appetite in northern Europe to bail out those who might fall into crisis has evaporated and more austerity in the south is nothing short of a toxic proposition to recession weary voters.  

The idea that Euroscepticism has peaked in electoral terms is also fanciful. Yes, Macron won in France but his victory was a product of the two-phase presidential electoral system there, which in the end gave voters a choice only between him and the far-right Marine Le Pen. In the first round Macron polled just 8.6 million votes. Three other candidates, namely Le Pen, Jean-Luc Melenchon from the far-left, and Francois Fillon on the centre-right, all ran openly anti-EU campaigns of one variety or another and polled just under 22 million votes between them.  The recent general election in Italy saw a massive surge in support for Eurosceptic parties. And eurosceptic politicians are already in government in Austria and Hungary.

Economically and politically, the EU is more fragile today than at any time since its creation. It is now vulnerable to a wide range of events that could trigger its collapse. A new recession or financial crisis could destroy the single currency. A decision by President Erdogan of Turkey to stop hosting migrants and refugees there in return for EU cash could re-ignite what is already a hugely divisive issue among EU member states. Even the mismanagement of a secession crisis, such as the one in Catalonia, could be the spark that ultimately drives a major country like Spain into economic crisis and to the euro exit door, unleashing contagion across Europe, and leading to the EU’s total demise.

If any of this comes to pass, its unmanaged nature will cause chaos on a scale to make the last financial crisis look like a minor footnote in Europe’s annual accounts. The one clear winner in the short term will be Vladimir Putin, who will seize on the EU’s disintegration to extend his sphere of influence across central and eastern Europe and into the Balkans. Perhaps even those who look forward to the day when the EU is no more should be careful what they wish for.