April 29, 2012
For a time, it appeared as though someone was benefitting from the 2008 financial crisis. A perception that the political left cannot be trusted in times of recession meant that voters across Europe unseated left of centre governments in favour of the centre right. Put simply, it appeared as though the advocates of small government and austerity had won themselves at least a decade of uncontested control.
A mere two years later, it has become clear that this picture was never going to be as simple as it once appeared. Most opinion polls in Britain place the opposition Labour Party ahead of the ruling coalition. In Spain, strikes are as common as siestas, due to a widely unpopular €27 Billion austerity package. In the Netherlands, a major cheerleader of Merkel’s austerity drive, the government has lost majority support in parliament due to disagreement about budget cuts.
In further contrast, it is almost certain that the centre right will be the ones who are defeated in the second round of the French Presidential election a week today, in favour of a self professed socialist. If Mr Hollande does what many are expecting him to do and unseats Sarzoky, he will be bringing with him a radically different set of policies from ones we have come to expect in times of economic stagnation. He has promised a 75% top rate of income tax, a reversal of Sarkozy’s rise in the retirement age and a separation of retail and investment banking to curb France’s dependency on the financial sector.
To make matters a little more complicated, the perception of economic credibility does not appear to be translating into overall public support. The unpopular British Conservative party continues to lead Labour on questions about economic competency. They score 44% in opinion polls as opposed to Labour’s 31%. A similar picture is found in France where the otherwise trailing incumbent leads Hollande by 14% in terms of ability to make difficult economic decisions.
The French election gives some insight into why such a confused picture has blanketed Western Europe. Several economic commentators, including the Economist, have been arguing for some time that the Presidential contenders were all doing a brilliant job of avoiding the existential problem that France is facing. France’s public spending accounts for 65% of GDP as opposed to an OECD average of 43%. Public debt is slowly reaching 90% and could conceivably reach 100% by next year. Once one takes into account France’s lack of competitiveness, in terms of exports, social charges and youth unemployment, it becomes utterly baffling that perceived economic competency is not translating into votes for France’s centre right President. Instead, they prefer to see a reversal of Sarkozy’s modest economic reforms and yet more public spending, paid for by taxing 75% of the earnings of the wealthiest few.
Put bluntly, Europe’s politicians are failing to convince their electorate of the long term necessities for economic reform. Their chosen economic philosophy, which they presumably believe in wholeheartedly, is failing to persuade citizens. As a result, far too many European elections are becoming either referendums on personality or unnecessary, unhealthy and divisive squabbles over class or race. Read more of this post