The Far Right Is Here to Stay

Mr. Salvini has been crowned (or at least, has crowned himself) this movement’s leader. During the campaign he met with fellow nationalists across Europe, and organized a big rally in Milan to unite the parties. His dream now is to build a cohesive voting bloc in the new Parliament that can shape the legislative agenda. He’s likely to fail: Nationalists aren’t known for cooperation and compromise, and many issues divide them, in particular Russia. Even so, they are a force to be reckoned with.

None of these parties seems any longer to support exiting the European Union or the eurozone. Instead, they want to change it from within. If the nationalist far right can mobilize a third of the European Parliament’s votes by making common cause with other conservatives, it will be able to do lots of damage, for example by blocking any attempt by the European Commission to punish a European Union country that violates the rule of law. Last year the Parliament issued such a warning against Hungary. Would the same thing be possible in 2020? It’s not hard to imagine the European Union becoming a union of liberal and illiberal democracies

Thankfully — and for this we can be grateful to voters — the euroskeptic nationalists are not the only new force to be reckoned with in the European Parliament. Liberal and Green parties were the surprise winners of this election. Together they gained about 60 additional seats, giving them a total of 176; with this will come much political influence. Perhaps the Greens will use their success to demand that climate change become a priority for the continent.

The Greens found their support predominantly among young, urban pro-Europeans who support the idea of a united Europe but are critical of the European Union as it exists today. They see Brussels as risk averse and neglectful when it comes to long-term problems like rising inequality and the environment.

So these are the victors:

  • Ecological liberals who want to preserve life on Earth and
  • national populists who want to preserve their way of life.

But what they have in common is the sense that the current trajectory of politics and society is not sustainable. They both offered change and change was in demand.

On the eve of the elections, a poll by the European Council on Foreign Relations found that while the trust in the European Union is higher than any time in the last 25 years, a majority of Europeans believe that the bloc will fall apart within 20 years.

For the moment, supporters of the European Union don’t need to panic. The elections demonstrated that Mr. Bannon’s predictions of a revolution at the ballot box were fantastical. The nationalist far right is not going to break up the European Union any time soon. But while these elections succeeded in containing the rise of euroskepticism, the real problem is not going away: europessimism.

Can the Euro Be Saved?

Across the eurozone, political leaders are entering a state of paralysis: citizens want to remain in the EU, but they also want an end to austerity and the return of prosperity. So long as Germany tells them they can’t have both, there can be only one outcome: more pain, more suffering, more unemployment, and even slower growth.

.. The backlash in Italy is another predictable (and predicted) episode in the long saga of a poorly designed currency arrangement, in which the dominant power, Germany, impedes the necessary reforms and insists on policies that exacerbate the inherent problems, using rhetoric seemingly intended to inflame passions.
.. Italy has been performing poorly since the euro’s launch. Its real (inflation-adjusted) GDP in 2016 was the same as it was in 2001.
.. From 2008 to 2016, its real GDP increased by just 3% in total.
.. the euro was a system almost designed to fail. It took away governments’ main adjustment mechanisms (interest and exchange rates); and, rather than creating new institutions to help countries cope with the diverse situations in which they find themselves, it imposed new strictures – often based on discredited economic and political theories
.. The euro was supposed to bring shared prosperity, which would enhance solidarity and advance the goal of European integration. In fact, it has done just the opposite, slowing growth and sowing discord.
.. Emmanuel Macron, in two speeches, at the Sorbonne last September, and when he received the Charlemagne Prize for European Unity in May, has articulated a clear vision for Europe’s future. But German Chancellor Angela Merkel has effectively thrown cold water on his proposals, suggesting, for example, risibly small amounts of money for investment in areas that urgently need it.
.. In my book, I emphasized the urgent need for a common deposit insurance scheme, to prevent runs against banking systems in weak countries.
.. The central problem in a currency area is how to correct exchange-rate misalignments like the one now affecting Italy. Germany’s answer is to put the burden on the weak countries already suffering from high unemployment and low growth rates.
..  The alternative is to shift more of the burden of adjustment on the strong countries, with higher wages and stronger demand supported by government investment programs.
.. Matteo Salvini, the party’s leader and an experienced politician, might actually carry out the kinds of threats that neophytes elsewhere were afraid to implement. Italy is large enough, with enough good and creative economists, to manage a de facto departure – establishing in effect a flexible dual currency that could help restore prosperity.
.. Whatever the outcome, the eurozone will be left in tatters.
.. It doesn’t have to come to this. Germany and other countries in northern Europe can save the euro by showing more humanity and more flexibility. But, having watched the first acts of this play so many times, I am not counting on them to change the plot.