Europe faces a string of political and financial events that may lead to further instability in a region already battered by the effects of multiple crises.
A lack of European tools, scarcity of national resources and the illusory but satisfying ability to treat the symptoms of an obscure disease, have distracted European political elites from a fundamental diagnosis of the shared roots of the many crises that have befallen them in the last seven years. Frustration and disenchantment have fueled the spread of radical anti-establishment parties advocating potentially destabilising populist policies. If the present political class wants to remain relevant, they need to decide whether to leap forward towards further European integration or completely reverse the course set after WWII. Several events across may occur in European countries in the next 9 months and these will probably result in more of the electorate slipping away from established elites.
Austria was scheduled to re-run the second turn of its presidential election on October 2nd (it has now been delayed to until at least December due to ballot irregularities). The election pits pro-Europe Green party candidate Alexander Van der Bellen in a close race against the Eurosceptic anti-immigration Free Party of Austria’s (FPO) Norbert Hofer. May’s result, which saw the establishment’s Van der Bellen narrowly defeat right-winger Hofer, was annulled on July 1st by the Austrian Constitutional Court on account of substantial electoral irregularities. Recent polls suggest that the intervening period did nothing to clarify voter preference and the race remains tight.
Should he win, Hofer has stated that he would veto the TTIP between the EU and the USA and that he may join the Austrian chancellor at EU Council meetings. The latter could be disruptive given the opposing political affiliations of these Austrian representatives.
In November, Italy will hold a referendum on a proposed constitutional reform. Following the January 2016 referendum announcement, Prime-Minister Matteo Renzi leveraged his personal popularity by staking his political career and the survival of his government on the vote. However, the No-camp has been gaining ground since the beginning of the campaign in April, matching the gains of the anti-establishment 5-star movement at municipal elections in June.
On 15 March 2017 the Netherlands will hold its next parliamentary election. For the first time since its foundation, the anti-Islam and Eurosceptic Party of Freedom (PVV) of the polemic Geert Wilders is leading in the polls. Estimates from voter surveys have given the PVV a plurality of the vote since September 2015 in response to the refugee crisis. Despite his confidence, the rise of Wilders to the premiership remains undermined by the unwillingness of other parties to join him in a coalition. Nevertheless, his victory may complicate political alliances and destabilise the political process, while giving Mr Wilders a bigger podium from which to advocate a radical agenda that includes a Dutch exit from the EU.
A month after the Dutch election, France will choose a new president in a two-round election on 23 April and 7 May 2017. Incumbent Socialist president Francois Hollande enjoys a record low 15% approval rating by the French electorate, making him very unlikely to gain the support in the first round necessary to be on the ballot in May.
Headlines have been captured by the rising popularity of Eurosceptic Front National leader Marine Le Pen whose support was not hurt by the sequence of attacks on Charlie Hebdo, the Bataclan theater and thePromenade des Anglais in Nice. On the right, Les Republicains could run either ex-president Nicholas Sarkozy or Alain Juppé, the mayor of Bordeaux and one-time Prime Minister of Jacques Chirac between 1995 and 1997. Both may be able to beat Le Pen on the second-round election. On the left, prime-minister Manuel Valls and Emmanuel Macron, the outgoing economy minister, are the only potential alternatives tothe unpopular president, but it is unclear if they could defeat Le Pen.
Since the election in December 2015 and notwithstanding the results of another election less than 3 months ago, Spain remains in a political deadlock caused by the rise of the left-wing Podemos and the centre-right Ciudadanos parties.
Last month’s failure by Mariano Rajoy, leader of the centre-right Popular Party (PP), to gain the support of parliament to form a government has alerted Parliamentarians to the fact a third failed attempt by the end of October could lead to an election on Christmas Day 2016. This could facilitate a decrease in voter turnout, which could favour the PP. However, if this fails, the backlash from other parties could be such as to further polarise parties and extend the political deadlock.
Greece’s inability to shed the instability triggered by the 2010 debt crisis creates a rich minefield of liquidity deadlines. The last bailout (the third since 2010), worth €86 billion was agreed on 16 August 2015. Of this total, €28.9 billion have been disbursed in increasingly smaller tranches during the last year. The latest disbursement, worth €7.5 billion, was provided in June 2016. However, another promised €2.8 billion necessary to pay two €1.4 billion short term government bills scheduled to mature on 7 October and on 4 November will only be disbursed if further reform targets are reached. The viability of long term international support will be tested again before the end of the year, when the deadline for an agreementon the debt haircuts that IMF demands Euro-Zone creditors accept as a pre-condition for its participation in any future Greek bailout expires. Without such relief, the saga is likely to continue with the country facing another €10 billion in maturing debt during 2017.
None of the above events is likely to bring the European project tumbling down in the next nine months. Indeed, none of them is likely to result in a complete overhaul of the status quo. But in nine months’ time the political landscape will have become more hostile to mainstream parties, with mounting political deadlock probably matched by increased financial flight to safe haven.
This article was originally published by Global Risk Insights and written by GRI analyst Filipe Albuquerque.
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