Spain’s Prime Minister Mariano Rajoy is applauded by members of his party during the second day of a motion of no confidence session at the Spanish parliament in Madrid, Friday, June 1, 2018. Socialist opposition leader Pedro Sanchez is on the brink of ending Mariano Rajoy’s more than six-year reign as Spanish prime minister in what would be the first ouster of a serving leader by parliament in four decades of democracy as Spain’s conservative government appears doomed to lose a no-confidence vote in parliament(
By Tim Lister, CNN
This week the third- and fourth-largest economies in the eurozone — Italy and Spain — experienced political earthquakes. Italy will now have a government of insurgents with little faith in the “European project.” Spain will have an odd coalition united only in ousting the unpopular conservative Prime Minister Mariano Rajoy. Spanish voters likely face their third election in three years.
Back in 2012, Europe had its “PIGS” problem (Portugal, Ireland, Greece, Spain): toxic banks, overwhelming debt and chronic budget deficits. Now it has the “PHIGS” of 2018: Poland, Hungary, Italy, Greece and Spain.
Today the challenges are more complex and diverse — but they have common roots in a growing popular disenchantment with the political mainstream. And the cast of characters is different.
A rude awakening
Italy is the most immediate threat to the European Union. In elections on March 4, Italians mutinied and handed victory to two parties that railed against the establishment both in Rome and in Brussels — the Five Star Movement (M5S) and the League.
They drew support from very different constituencies. The M5S is unashamedly populist, promising poorer Italians a better deal. The League’s supporters are better off, but equally hostile to immigration and the power of the EU.
Earlier this week, President Sergio Mattarella nixed their nomination of a prominent euroskeptic as Finance Minister. All hell broke loose, and there were mutterings about impeaching Mattarella. But by the end of the week, the M5S and the League had their way as the President accepted a revised cabinet lineup.
Europe is about to get a rude awakening. But Jean-Claude Juncker, the European Commission President, isn’t rolling over — saying that Italy needs “more work, less corruption, seriousness.”
The financial markets are relieved Italy has a government after nearly 90 days without, but apprehensive about what comes next. The recipes advanced by M5S and the League combine higher public spending and tax cuts — a high-risk strategy in a country sitting on a debt pile of 2.1 trillion euros and an inflexible labor market.
By contrast, Spain has made huge progress since being on life support six years ago, when its banks were sinking and ratings agencies valued its debt at a notch above junk, on a par with Azerbaijan. Its economy is growing at a healthy tick; unemployment is down (though still high); its credit rating is restored. And Spaniards are enthusiastically pro-Europe.
What of the other PHIGS?
Now Greece runs a budget surplus, but its cumulative debt is 180% of its gross domestic product (Italy’s is 133%.) On August 20, it exits the intensive care administered by the European Central Bank and International Monetary Fund, but Europe has to decide what sort of debt relief it will offer on the $280 billion Athens still owes.
Germany and others are not in charitable mood, and there’s no guarantee of an agreement that will allow Greece to sustain its debt load when EU finance ministers hold a make-or-break meeting later this month.
Then there are Poland and Hungary. They are financially in good shape but at war with Brussels on everything from immigration and the independence of the judiciary to freedom of the press and “democratic values.” They have right-wing populist governments that might be charitably described as “semi-detached” from the EU. Both rejected EU plans for migrant quotas to share the burden of the influx arriving across the Mediterranean, prompting the European Commission to bring legal action.
Viktor Orban, who dominates Hungarian politics as Prime Minister (he won his third term in April) and leader of the governing Fidesz party, promotes what he calls an “illiberal” alternative to European consensus.
Poland, meanwhile, has sided with the Trump administration against its European partners on subjects as varied as Iran sanctions and Russian gas pipelines to Europe. Warsaw’s measures to restrict the independence of the judiciary have brought censure from Brussels.
To try to rein in these wayward members, European officials are floating the prospect of cuts in the generous financial support given to the former Communist states that joined the EU in the 1990s. The EU budget will take a hit when the UK leaves; Poland (which gets about one-tenth of the EU budget) and Hungary may pay the price.
And finally of course, on the EU’s menu of unsolved issues, the terms for Brexit are far from concluded, despite more than a year of negotiations and the looming deadline of March 2019.
Once Britain leaves, Germany and France will once again be the motors of Europe, as they were when the original Common Market was formed. There were hopes that a Macron-Merkel axis would lead the European Union to the sunlit uplands of a new era, but the French President’s ambitions to deepen integration are not matched by the German Chancellor’s caution.
Merkel has been chastened by the eruption of German populism in the shape of the Alternative for Germany, the far-right anti-immigrant party that is now the official opposition in the German parliament.
As if Macron and Merkel don’t have enough on their hands, the EU also has to deal with the headache of an incipient trade war with the US.
In 1954 one of Merkel’s predecessors, Konrad Adenauer, set out lofty goals. “The unity of Europe was the dream of a few. It became the hope of many. Today it has become a necessity for all of us,” he said.
In its many iterations since, the European project has survived crisis after crisis. Odds are it will stumble through these multiple challenges. But if the horizon looked dark in 2012, it’s positively thunderous now.