European Parliament election results, outside of France and UK, are positive for EU and euro

The European Parliament election results were much better in most countries than expected from the point of view of those who favour the survival of the EU, and also the survival of the euro. The only two, admittedly important, exceptions were the UK and France where anti-EU, anti-immigration parties won the most MEPs, as had seemed likely. In two euro area countries, the Netherlands and Finland, there were significant setbacks for similar parties. In Austria the Freedom Party which has stirred controversy for decades remained stable with 20% and in Hungary right wing nationalist parties did well but not more so than in previous elections. Elsewhere in central and eastern Europe the great majority of seats continued to be won by strongly pro-EU parties, although this was also in line with expectations.

Encouraging results were recorded in most of the countries at the centre of the euro zone crisis of the last five years. Germany voted overwhelmingly for parties that support its membership of both the euro, highly controversial both at the beginning and, more recently, over supporting measures to bail-out weaker members and particularly the European Central Bank’s preparedness if necessary to save the euro to make unlimited purchases of their government debt. The anti-euro (but not extreme and not anti-EU) party Alternative fur Deutschland won a very modes 6.7% of the vote, while the extreme NPD won %.

In Greece, Italy, Spain and Portugal, all of which have suffered severe losses of living standards and high unemployment during the last five years, there were overwhelming majorities in favour of parties committed to remaining in the euro and the EU. The highest anti-euro vote was in Italy, for Beppe Grillo’s Five Star Movement which has called for a referendum in euro membership and is anti the whole of the rest of Italy’s political establishment received 20% of the vote, but while a year ago it came close to the vote of the largest established party the left-of-centre Partito Democratico,this time the PD, led by the young new prime minister, Matteo Renzi won double the vote of Grillo’s party with just over 40%, well above that achieved by any left-of-centre party in the history of the Italian Republic. In Greece, the leading party in the EP election was the more left wing Syriza, led by Alexis Tsipiras, which calls for an end to austerity but not for leaving the euro area or EU. The governing New Democracy still held on as the second largest party despite direct responsibility for draconian economic measures needed to cut the public sector deficit. The extreme and sometimes violent right wing New Dawn won 9.6% of the vote which is disturbing but not an increase on previous elections. In Spain there was virtually no votes for parties against membership of the euro or EU despite one of the deepest economic depressions after Greece and unemployment of young people over 50% according to official figures. The two parties which have governed Spain since its entry into the EU in 1992 and into the euro in 1999, and were responsible therefore together and in roughly equal measure both for the austerity policies of the last five years and the mistakes in earlier years that contributed to the crisis, the Popular Party (PP) and the Socialist Party (PSOE) together won 49% of the vote which in the circumstances was a reasonable performance, although it led the leader of the PSOE which came behind the PP to resign. The rest of the vote was widely divided. Not at all surprisingly the established party to the left of the PSOE the United Left (IU) increased their vote somewhat to 10%. More interestingly a new party, Podemos, formed out of the Indignados movement of peaceful city centre protests by young people won 7%. Podemos like the Greek Syriza wants an end to austerity policies but does not call for exit from the euro. Another new party is the centrist Union for Progress and Democracy which won 4.7%. There were increased votes for regional parties, which in Catalonia and the Basque Country are calling for full independence within the euro and the EU. These do represent something of a problem since a fragmentation of the already large number of member states would make EU governance more difficult and there would be controversy over admitting new countries formed out of member states as EU member states. In Portugal there was also an increase in opposition to austerity policies but not towards the euro and EU.

There clearly was a move against existing economic policies in southern Europe but that is part of a healthy democracy. The question is whether their voice will be heard. The southern member states have had little choice over the last five years because of the need to either keep the support of bond markets or, where these are lost, to meet the conditions for loans managed by the troika of the IMF, ECB and European Commission. With government accounts now moving into primary surplus (income less expenditure excluding debt servicing) which gives a little more room for manoevre at a domestic level but policies at the EU level remain important for them. Given his strong position domestically and the fact that Italy will take on the presidency of EU Council of Ministers’ meetings in the second half of 2014, Renzi is likely to try to push for more expansionist policies. However, fiscal policies of countries without difficulties in borrowing are decided at a domestic level, while monetary policy is conducted by the ECB, which is strictly independent of governments. Nevertheless the ECB is now considering the controversial idea of quantitative easing and doing so by encouraging banks to lend more at reasonable interest rates to small and medium enterprises, given the huge imbalance in lending conditions between the member states of the supposedly single monetary area, the euro zone. Renzi or others could risk a backlash if they try to push the ECB in this direction but they are entitled to argue against any efforts at the political level to support the Bundesbank which may resist monetary loosening but be outvoted on the ECB board. No-one should be complacent over the situation in euro zone states with high unemployment, but the euro zone does at present look to be a going concern, and to have political legitimacy in most of its member states.

EP elections are likely to indicate disenchantment despite recovery in support for EU

Public opinion becomes more favourable to EU

European Parliament elections to take place across the EU between May 22nd and 25th are likely to suggest weak support for the European project both from low turnouts and because of strong gains by anti-EU parties especially in France, the UK, the Netherlands and Italy. Just before, on May 12th, the independent Washington DC-based Pew Research Center released a survey of public opinion towards the EU in seven mostly large member countries. The survey is encouraging to those who hope that the EU has good survival prospects in that opinion towards the EU has become, for no very obvious reason, significantly more favourable in the 12 months before the survey was conducted in March-April 2014. The median of countries favourable to the EU moved up from 46% in 2013 to 52% (although it was 60% as recently as 2012). The survey does not ask how many were hostile to the EU but since the remaining 48% must include those with or neutral opinion and don’t-knows, it is reasonable to assume that the margin of those favourable to the EU in relation to those with hostile opinions has moved towards a comfortable margin. Moreover, the UK generally assumed to be the country most hostile to the EU was in fact the median country with 52% favourable (up from 43%) while opinion in France, the country which took the lead in founding the EU’s first precursor in 1951, rose from a poor 41% to a respectable 54%. Opinions in two important countries Poland (up from 68 to 72%) and Germany (up from 60 to 66%) were massively favourable. While Polish views might be partly linked to the inflow of EU funds and the outflow of Polish labour, German taxpayers are in contrast the EU’s largest net contributors and it is a recipient of immigration, now fully free from 27 of 28 member states.

The input from the southern European countries selected, Italy, Spain and Greece, was much less favourable. Most notably Italy where opinion for much of the period since the founding of the EU’s first predecessor in 1951 had been strongly pro-EU saw a severe decline in favourable sentiment over the 12 months from 58 to 46%. Greek pro-EU opinion not surprisingly in view of the uniquely severe economic depression it has been through was weakest at 34%, marginally up from 33%. But Spain which has also suffered economic conditions that can appropriately be described as depression saw an improvement in favourable opinion from 46 to 50%. A notable factor is that young people (18 to 29) are significantly more favourable, the median country being in this case France at 63%.

 

but not its Parliament or Commission

Other aspects of the poll should be deeply worrying to policy-makers in both Brussels and member states. Support for the main EU insitutions, the European Parliament (the median country being the UK at 36%) and the European Commission (also the UK together with Italy at 34%) is low. A median of 65% say that “the EU” (probably here closely identified with the above-mentioned institutions rather that the Council of member governments) does not understand the needs of its citizens, 57% that it is inefficient and 63% that it is intrusive.

 

Parliament will push for one of lead candidates to be Commission president

For better or worse, the European Parliament, one of the two institutions which EU citizens feel are distant from them, wants to have more influence on the other, the European Commission, by linking the EP elections to the choice of Commission president. This has led to a series of lively televised debates between the candidates of five political groupings. All five agreed that the next president of the Commission should come from their number and win the backing of a majority of the EP which is elected over May 22-25. The new EP itself is likely to take the same position. The first choice would be the member of the largest party emerging from the election, which polls indicate will be the centre-right European Peoples’ Party is Jean-Claude Juncker, who has far from outshone his four rivals in the debates. Another possibility if the choice were purely up to the EU would be that some or all of the four parties of  the Liberals, the Socialists, the Left and the Greens vote for an agreed candidate, most likely Martin Schulz the Socialist candidate, who would be able to obtain more votes than Juncker. However, it is very unlikely that the heads of government, who in Germany, Spain, the UK and Poland are from the centre-right would agree to appoint Schulz.

 

but may come into confrontation with governments

Juncker has asserted that the next president should for “democratic” reasons be chosen from amongst the five and that to do otherwise would be a travesty of democracy. But it is unlikely that many even among those who vote for the Peoples’ Party will feel strongly. Taking this election in isolation the democratic argument is a weak one. A stronger argument in favour of choosing one of the five would be that if the precedent is set next time more attention will be paid to the debates and there will be more incentive for good candidates to stand, whereas if someone else is chosen no-one will believe that the same will not happen next time and there will be little motivation for strong candidates to stand or for voters to take an interest in them.

The probability seems to be that the European Council of heads of government which meets on May 27th will want to choose someone other than one of the five debaters, with the current director of the IMF, Christine Lagarde, who would be the first female president, being the favourite. What is not clear is how it will set about persuading the European Parliament to accept her. A deadlock between the two institutions is very possible. This will be a particular challenge for Angela Merkel, who as the leading Christian Democrat (Christian Democrats or related parties form the majority of the European Peoples’ Party) was influential in choosing Juncker to represent the EPP and would have to explain to members of the European Parliament why she and other heads of government want to pass over him.

Ukraine: all sides, inside and outside the country, should strive for de-escalation

The more emollient tone adopted by Russia’s President Putin on May 7th in particular his apparent support for Ukraine’s election on May 25th, should be reciprocated by the EU. The rapid escalation in recent weeks to a state of near civil war in Ukraine is disastrous for all sides in and outside Ukraine. It represents a major disaster for the EU’s neighbourhood policy whose objective is to bring stability. It has suffered a major reverse from events in North Africa and Syria. Although developments across the Mediterranean have little do with any EU policies, this cannot be said of Ukraine, where the EU’s attempts to negotiate an association agreement have, albeit inadvertently, led to conflict. One mistake was to have presented the former Ukraine president, Victor Yanukovich with too sharp a choice between closer relations with the EU and closer relations with Russia. An imaginative approach could be to find away in which closer economic relations with the EU could be made compatible with closer relations between Ukraine and Russia (and indeed other ex-Soviet countries). If the outcome were to let Russia and other countries have more access to the EU market that would be no bad thing the only proviso being that Russian companies competing in the EU be subject to EU competition rules. This is in any case already an issue particularly in relation to Gazprom.

The EU should try to persuade the interim Ukraine government to hold back from further confrontation, to try tackle the Right Sector and other Ukrainian nationalist extremists more effectively, to promise full and guaranteed rights for Russian as a second language and ensure non-discrimination against Russian speakers and to be willing to enter a dialogue over increased local autonomy as a response to Russian demands for federalisation. The latter is the most difficult issue and there is concern about one country making demands on how another country should conduct its internal affairs. But a de-escalation now requires both sides to make conciliatory moves.

It is possible that Putin’s apparently conciliatory tone is a ruse and that possibility should prepared for. That said, it is hard to see what aim he would be looking to achieve if he is not sincere. It cannot be in his or Russia’s interest to have a failed state the majority of whose population is hostile to Russia as a neighbour. In the 100th anniversary of the start of the First World War it is worth remembering that a series of belligerent responses to the situation led to an outcome which was disastrous for all concerned, particularly Austro-Hungary, Russia and Germany but also the eventual victors, Britain and France.