segunda-feira, 23 de março de 2015

Growth alone will not stabilise Europe

Europe is in a race against time. After six years of economic crisis, extremist political parties are well-entrenched across the continent. Set against that, the European economy is in better shape than for some years. The question is whether economic optimism can return quickly enough to prevent the bloc’s politics slithering over the edge.

The signs of political rot are very evident. In France this weekend the far-right National Front (FN) notched up about 25 per cent of the vote in regional elections, confirming its strong performance in last year’s European parliamentary elections. Prime Minister Manuel Valls has warned that Marine Le Pen, leader of the FN, could actually win the presidential election in 2017. That same year, Britain could vote to leave the EU. And by then the single currency could also be well on the way to disintegration, with Greece out and Italy heading for the exit.

But while the political signals are still bleak, there are grounds for economic hope. Spain and Ireland, two of the countries that have suffered worst from debt crises and austerity economics, are finally recovering. Spain is expected to grow at 2 per cent this year and unemployment in Ireland will drop below 10 per cent soon. Even Greece, before the latest twist in the crisis, had experienced a return to economic growth. More broadly, the combination of lower oil prices, a falling currency and monetary easing by the European Central Bank should deliver a considerable stimulus to the EU economy this year.

A return to growth might give Europe some breathing space and head off the chance of political disaster. The difficulty is that, although there is clearly a connection between economic hardship and political extremism, the relationship is not precise. The collapse of the political centre can be a delayed reaction to economic trouble — and can kick in just as the economy is recovering. To choose a particularly doom-laden example: the Nazis took power in 1933, after the worst of the German depression was over.

A depression, or a very prolonged recession, does more than create economic hardship. It also serves to discredit mainstream ideologies and to whip up anger against political elites — and those effects can last well beyond the point where the economic figures show some improvement.

Furthermore, a sense of economic crisis is only one source of the support for the political extremes in France. Fear of immigration and anger about elite corruption have bolstered the FN — and driven the rise of fringe political movements in Italy, Germany and the UK.

A return to growth is also unlikely completely to address the sense of economic malaise in the EU. Across Europe there is a fear that whole nations have been living beyond their means and may have to accept a permanent downward adjustment in living standards. In countries such as Greece, Portugal and Ireland, that adjustment took place in a fairly swift and brutal fashion because of the financial crisis — and has resulted in cuts in nominal wages and pensions.

But even countries that escaped the worst of the crisis are going through an adjustment in living standards that is hitting the young particularly hard. Rates of youth unemployment are frighteningly high in some countries: above 50 per cent in Spain, nearly 40 per cent in Italy, 23 per cent in France and 17 per cent in the UK. In all these countries, there is a fear that the rising generation will live less secure lives than their parents.

As a result, even when governments can boast about relatively strong growth, there is disillusionment with the political establishment. In Britain’s general election in May, it is likely that there will be a record low share of the vote for the parties that have dominated postwar politics, the Conservatives and Labour, and strong gains for nationalist parties in Scotland and England.

Britain’s political problems are relatively mild compared to those of many of its neighbours. In Italy all of the leading opposition parties are now in favour of pulling Italy out of the euro — a remarkable trend in a country that has traditionally been fervently committed to the European project.

Hungary is governed by a semi-authoritarian administration and has an overtly racist party, Jobbik, on the rise.

But it is France that matters most. If Britain left Europe or Greece quit the euro, the European project would stagger on. But the election of Ms Le Pen as French president would in effect spell the end of the EU.

In an effort to avoid ratcheting up political tensions in the country, Brussels has just allowed the French government once again to break EU rules on budget deficits. The fact that the FN has not made a decisive breakthrough in this weekend’s elections will feed the hope that the cavalry of an economic recovery will arrive, just in time, to stabilise the country.

But ultimately France and the rest of the member states need more than a modest uptick in growth to restore the health of their political systems. They need mainstream politicians that can paint a convincing and optimistic picture of the future. So far, there is not much sign of that.

Gideon Rachman

Fonte: FT