BY THE TIME of the European parliament elections in June, this year’s rightward drift in European politics will have turned into a tidal wave. Ultra-nationalist demagogues and populist-nationalists are now leading the polls in Italy, the Netherlands, France, Austria, Hungary and Slovakia, and running second in Germany and Sweden. There are two hard-right groupings in the European parliament – “Identity and Democracy” and “European Conservatives and Reformists”. Between them, they could secure as much as 25% of the June vote. But even more ominously, in almost every part of Europe including Britain, these factions are forcing the hand of the traditional centre-right parties – which, one by one, are capitulating to ever more extreme anti-immigration, anti-trade and anti-environment positions. . . .
WEST HAS TURNED PROTECTIONIST The rightward shift is, of course, a western and not just European phenomenon, with Trump 2.0 advocating a far more aggressive protectionist and nationalist agenda than Trump 1.0. But Europe stands out from the US in one important respect. While the US economy roars forward – even if the average American voter does not feel the full benefits – Europe, and especially its industrial engine-room, Germany, continues to suffer from near-zero growth and stagnation in terms of living standards. And having lived through a decade of consistently low growth, the continent is now divided between an optimistic but declining minority, who still hold to the expectation that a rising tide lifts all boats, and the growing and more pessimistic majority who now see life as a zero-sum game...
. . . EUROPE ENTERS DOOM LOOP
A low-growth economy creates a doom loop as pessimism begets a blame culture – and the more we blame others, the more pessimistic we become. Once people convince themselves that the state of their economy is so weak that they can only improve their lot at someone else’s expense, they vote for parties that specialise in targeting those they think are holding them back – immigrants, foreigners and minorities.
These parties offer nothing in terms of economic policies to generate long-term growth. The result is that zero-sum politics exacerbates the downward economic trends, and this, in turn, intensifies and widens the appeal of zero-sum thinking. The problem Europe now faces is that the very measures it must adopt to escape this doom loop – new investment in technology, clean energy and medical advances – are being rendered impossible by its policy of fiscal retrenchment. .
. . UNABLE TO INVEST IN GROWTH
The European growth and stability pact rules out member states having deficits above 3%, and perhaps as importantly, makes no distinction between public spending on consumption and spending on investment. Added to that, Germany has a debt brake enshrined in its constitution which limits the government’s structural deficit to 0.35% of GDP. This casts a shadow over the whole of Europe, with the German people facing severe cuts in public spending – cuts that will torpedo any chance of repairing the country’s beleaguered infrastructure and frustrating its transition from heavy engineering to IT and AI-based industries. While China can subsidise to the point of undercutting Europe on electric cars, batteries and other new technologies, and Bidenomics is running huge deficits that are stimulating the economy, Europe is stuck in a fiscal bind. The European recovery and resilience facility ends for good in 2026, with no replacement. The stability and growth pact, which has restrictive conditions that were suspended during the Covid crisis, resumes its tough regime next year. France and 11 other European countries are already in trouble, unable to invest more because they are already running allegedly unsustainable deficits
. . . . ANTI-ENVIRONMENTALISM RISES
So, at the very time that investment needs to increase, it is likely to fall. And the European election results are unlikely to make things any better. Essential green investment will fall down the agenda as anti-environmentalist parties gain an upper hand. Protectionism will become the order of the day with trade wars, which hit Europe harder than anywhere else. Unless something gives, a low-growth Europe will remain stuck in its rut – and the populist xenophobes will triumph.
. . . [This is an extract from a 29 April, 2024 essay by former British Prime Minister Gordon Brown printed in the Guardian, a UK newspaper.]
