Bill Emmott - International Author & Adviser


The Euro´s Feckless Rulers Back the Torroise Against the Hare
FT - December 2, 2014

Pope Francis may think of Europe as a haggard grandmother, but this eurozone granny´s got a gambling habit. She used to roll her dice against the bond markets: now her target is electoral politics. It is only a matter of time before an opposition party dedicated to dumping the euro, or to policies anathema to the euro’s current rulers, gains power in a eurozone country.

For Europe is in a race, and politics is running faster than economics. The prevailing eurozone policy of muddle-through-while-slimming down, led by Germany and being enforced by the new European Commission, depends on the idea that the economic tortoise will in the end outpace the political hares.

So far, this has proven true. Incumbents have regularly been turfed out of office in general elections in eurozone countries, but none has yet been replaced by the kind of anti-euro or anti-European Union parties we all love to deride as “populist”. But for how long?

Victorious oppositions, such as those in elections in Spain in 2011 or Greece in 2012, have come to power with a line guaranteed to be unrepeatable: “We condemn utterly our incompetent predecessors, but now that we are elected we are going to follow the same policies. We have no choice.”

That is why in Spain the opinion polls are now being led by a left-wing party that didn’t exist 10 months ago, Podemos, and why in Greece Alexis Tsipras’s far-left Syriza is also in prime position. Spain will have a general election at the latest in December 2015, while Greece may have a snap election next spring if Syriza succeeds in blocking the choice by Parliament of a new president.

Neither Podemos nor Syriza is explicitly anti-euro. But both stand for interventionist, rather left-wing policies that would cause an immediate confrontation with both Brussels and Berlin. And an even bigger danger lies in the country sitting between the two in the Mediterranean: Italy.

This week, the eurozone’s third largest economy, bearing a public debt of well over €2 trillion, found itself in a novel situation: all three of its main opposition parties are now against the euro. The Five Star Movement led by Beppe Grillo favours a referendum on euro membership. The anti-immigrant Northern League favours outright withdrawal. And the newcomer is Silvio Berlusconi’s right-wing Forza Italia party: Mr Berlusconi has begun floating the idea of launching a parallel currency to the euro.

That’s all very well, you might say, but Matteo Renzi, the 39-year-old prime minister, is Italy’s true political rebel, his centre-left Democratic Party is leading the opinion polls, and he is staunchly pro-euro. All true, and he is even a liberalizing reformer. The danger, though, is that in order to force through his reforms, Mr Renzi keeps on threatening to call a general election.

Since he came to office in a party coup in February this year Mr Renzi has proposed a lot of reforms, and even got some through preliminary parliamentary votes. But he has got nothing major on to the statute books. His opponents, even those like Mr Berlusconi who claim to favour some of his reforms, are playing for time.

They might even be winning. Mr Renzi’s approval ratings have just dipped below 50% for the first time. And the Northern League, under a new leader, Matteo Salvini, is looking resurgent at least in local elections, which is probably why Mr Berlusconi has decided to emulate its anti-euro stance. The next time Mr Renzi threatens to go to the polls, the other parties might just let him.

He might win. But the point, whether in Italy, Spain, Greece or elsewhere, is this. By sticking to their current policy of hoping a blend of austerity and reforms will bring recovery which brings jobs, eurozone governments seem to think they are being prudent and patient. Actually they are taking a huge risk. Hares do win, sometimes.


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