The euro wasn’t just meant to provide economic harmony. It was supposed to ensure political stability as well. Neither has happened and a generation of politicians will pay for it.
Parties win and lose elections all the time. But it is rare to be destroyed as completely as Fianna Fail was in Ireland on the weekend. The party that has dominated Irish politics since independence in the 1920s was pushed into third place.
What happens in Ireland doesn’t matter much to anyone but the Irish. It is a small country of about 4.5 million on the edge of Europe. But the Irish results are a sneak preview of greater turmoil ahead. Chancellor Angela Merkel’s approval ratings are at risk as her party strikes electoral trouble in Germany. President Nicolas Sarkozy’s reelection in France is surely in doubt. And Prime Minister Silvio Berlusconi seems finished as a force in Italian politics, not just because of his interest in young women.
The euro is destroying the prospects of reelection for governments everywhere. Saving the currency demands hugely unpopular bailouts or it calls for grueling austerity measures.
As it becomes clear that support for the single currency means sacrificing your political career, it is inevitable that leaders will increasingly give up on the project.
The Irish results were the kind of thing to send a shiver down the spines of elected leaders everywhere. Sure, you lose a vote sometimes. The other guys get a chance to run the show occasionally. That’s the way the system works. You can usually reckon that in five or 10 years it will be your turn again.
It seems unlikely Fianna Fail can bounce back from this defeat, though. Overnight, it has gone from the natural party of government to a fringe movement. As of late Monday and with more votes to count, it had won 18 seats in the new parliament, compared with 70 for traditional rival Fine Gael.
And it’s not just Ireland.
Look what happened to Merkel’s ruling Christian Democratic Union in Hamburg. In regional elections last month, her party took just 21.9 percent of the vote. That was half its score in 2008 and the lowest in the city since 1946. True, there are always lots of local issues involved in every election. But German voters are understandably angry about having to bail out the struggling members of the single currency. Merkel has talked tough, but when the crunch comes, she signs the checks. Now she is paying the price for that.
None of Europe’s main leaders looks secure right now. In France, Sarkozy’s grip on power is fading. One recent poll showed 52 percent of the respondents want International Monetary Fund Managing Director Dominique Strauss-Kahn to win next year’s presidential election. That compares with 21 percent who wanted Sarkozy to get a second term. That’s a huge gap to close.
In Greece, Prime Minister George Papandreou is being punished for presiding over an economy in deep recession and handing over management of the country’s finances to the European Union and the IMF. His Pasok party is down to 25 percent in the polls. In Finland, the anti-euro True Finns party is soaring in popularity.
Even Italy’s Berlusconi looks to be on the way out after three turns in office. He is one of the great survivors of both business and political life. But a trial on charges of paying for sex with a minor? Even Bill Clinton would have decided to throw in the towel at that point. It is hard to see how anyone can come through a scandal of that magnitude intact, especially against the backdrop of dismal economic growth.
Of course, not all the troubles can be pinned on the euro. Berlusconi is largely the author of his own downfall. Sarkozy talked big and delivered small. And yet if either man hadn’t been presiding over a stagnant economy, they might be in better shape. Voters will forgive a lot if the economy is running at a good clip, if people are feeling richer and if there are plenty of well-paid jobs around.
Merkel is feeling the anti-euro backlash directly. So, too, less directly, was Ireland’s Fianna Fail. The implosion of the Irish economy resulted from joining a currency union whose shared interest rates were far too low for its own economy. The result was a banking and property bubble followed by an almighty crash. The ruling party is taking the rap for that. It was the euro, rather than anything Fianna Fail did or didn’t do, that was at the root of its problems.
Any prime minister, president or chancellor who fights to keep the single currency intact is going to get into trouble. It is easy for officials at the European Union headquarters in Brussels or at the European Central Bank in Frankfurt to say we have to do this or that to salvage the single currency. None of them gets elected by popular vote.
When you have to tell ordinary Germans or Finns they have to pay more tax to bail out the Greeks, or when you tell the Irish or the Greeks they have to accept massive austerity to make sure the bond markets don’t lose faith in the euro, it is a different story.
Europe’s leaders are fond of saying they will do whatever it takes to save the euro.
But does that include ending their political careers? And consigning their parties to history’s dustbin?
It seems unlikely.
And as they increasingly realize they have tied themselves to a project that virtually rules out reelection, don’t be surprised to see them turning their backs on it.
By Matthew Lynn
Matthew Lynn is a Bloomberg News columnist and the author of “Bust,” a book on the Greek debt crisis. The opinions expressed are his own. ― Ed.
(Bloomberg)
