“Therefore, send not to know/For whom the bell tolls, /It tolls for thee.”
–John Donne, 1624
Let me begin with a truism. My analytical career has not suffered from betting against Europe.
For much as I love the lifestyle and all that comes with it, the continent’s complete, pathetic inability to solve any of its many existential problems–the endless euro crisis, non-existent rates of overall growth, Depression-era levels of youth unemployment in the south, and no common policy on refugees–unsurprisingly has toxic political ramifications.
It almost does not matter which political crisis next knobbles Europe. There are plenty to choose from. But instead the key analytical reality is that one of them will soon further grievously wound the dying power in the coming year.
Lurking beneath the sturm und drang of Trumpism, the most recent growth figures for the continent were released. They make for the usual dismal reading.
In the third quarter of 2016, Euro-zone growth overall was an anaemic .3% of GDP; in France .2%, Italy .3%, and Germany .2%. Given that in a modern industrialised country .5% is the bottom end of what is acceptable, this damning economic reality—try as apologists may—can no longer be ignored. Indeed, the economic poison has now seeped into the European body politic.
In Spain, after two elections and almost a year of deadlock, centre-right Prime Minister Mariano Rajoy was returned to form a weak minority government. While the Spanish economy is picking up again from a catastrophically low base (it grew at .7% in the third quarter), Madrid must find five billion euros in tax increases or further spending cuts if it is to meet its deficit target mandated by the European Commission. It is hard to see either the far left Podemos Party or the electorally chastened Socialists going along with this. Rajoy is in for a very bumpy ride.
Given that French President Francois Hollande’s recent approval rating is just four percent (that’s not a typo) and that far right Front National (FN) leader Marine Le Pen remains (at least for now) un-electable, the establishment candidate of the centre-right Les Republicains, Francois Fillon, will be the next leader of the country.
If France keeps to its current lengthy trajectory of almost no growth, this, coupled with the fears of further terrorist attacks, could propel Le Pen to the presidency the next time out. It is possible that in the final round of this year’s elections she will double her father’s earlier vote tally of more than 18%. Le Pen’s political wager against the French establishment looks more than plausible.
In Italy, reformist Prime Minister Matteo Renzi is running about five points behind in his pivotal December 4th referendum on electoral reform. Renzi has reiterated that, if loses the vote, he will resign. This would lead to new elections early in the new year, where the populist, anti-euro Five Star movement of Beppe Grillo is running neck-and-neck with Renzi’s centre-left Democratic Party. A Five Star victory would lead to Italy having a referendum on euro membership, with the outcome up for grabs.
Even in Germany, while Angela Merkel is on course to win a dispiriting re-election (proving the adage that the tallest pygmy in the village is considered a giant), the far right, xenophobic AfD is on course to rocket up from nothing to anywhere from 15-18% of the vote in the autumn 2017 parliamentary elections. This means a further joyless grand coalition between Merkel’s CDU and the leftist SPD is on the cards.
As is true with France, while the establishment parties will hang on this time, another term of Merkel’s do-nothingism will only help the populists, putting even this most stable of European polities at risk of major political disruption.
It is true that not all these apocalypses will come to pass. In fact, it is quite possible that most will not. But given the already weakened state of Europe, if one ghoul here from Pandora’s box does escape, surely the writing is on the wall for the prospects of the continent as a whole. It is time to face facts; Europe is over.
Published in City AM Money, December 2016