Minority governments ‘à la mode’ in Europe but can they last long?

European Council; preparing for the family photo (14/12/17, Brussels). From left to right: Donald Tusk, President of the European Council, Angela Merkel, German Federal Chancellor; Mark Rutte, Dutch Prime Minister. From behind Emmanuel Macron, the French President and the Italian Prime Minister Paolo Gentiloni look on. Copyright: European Union

With the Italian elections set for 4 March and anticipated to produce a hang parliament, four out of the five bigger European countries will be in political limbo for a good part, if not for the entire new year 2018. France is the only exception in this Euro-plague of political uncertainty. In some cases the problems are exclusively and directly self inflicted by the political elites. In other occasions, it’s the citizens who cannot expect anything different from the political system  and so they vote vengefully.

Britain is the typical case of the self inflicted kind of problems, caused by poor political judgment of her leaders. The series of blunders started with the previous Prime Minister, David Cameron who very lightly promised to hold the referendum about leaving the EU. Next was the incumbent head of government, Theresa May. She thought winning a legislative election would have been as easy and enjoyable, as a summer evening stroll in London. So she proclaimed an early one for June 2017 and lost the absolute majority her party, the Tories had in the previous parliament. Now she is unable to answer the simple question, ‘what kind of divorce with the EU, her country wants’ (Brexit).

Germany after Britain

In Germany though, Chancellor Angela Merkel hadn’t many choices. She was obliged by the constitution to set an election day in September 2017, knowing she was to lose it. Her party lost one million voters and her image is now definitely tarnished. The No 2 German politician, the shrewd old fox and former Finance Minister Wolfgang Schäuble, currently President of the Bundestag (the parliament) presses openly for a minority government under Merkel, supported only by the neoliberal center-right CDU/CSU political grouping.

Obviously he thinks that in such a case his legacy of austere economic policies will remain intact, given the limited legislative abilities of a hobbling administration. Schäuble remains obstinately indifferent vis-à-vis the danger his country may slide to political extremism, exactly because his super austere policies continue being enforced. The wrong management of the immigration problem by the German political elite was badly received also in the lower social strata.

Hone made Spanish impasse

In Spain, Prime Minister Mariano Rajoy heads a minority right wing administration, with the backing of the Ciudadanos (Citizens) party and the abstention of socialists. This last party, in order to come to terms with the conservatives, had to force out its then leader Pedro Sanchez, who had rejected the cooperation. In short, Rajoy managed to split and in many ways damage the socialist party, in order to break a many month government stalemate. Since then he has being following nationalist and austere policy lines.

The main expressions of those policies were the foreclosures of tens of thousands of homes by banks and the belligerent stance towards the Catalonia separatists. This latter policy choice proved to be ‘magical’ personally for  Rajoy, but not for Spain. Riding on the nationalist ticket and confronting the Catalan affair with utmost force and violence, he managed to secure an overwhelming backing in the Spanish legislative. Very few Spanish politicians wanted to appear less patriotic than Rajoy. However, this line of events doesn’t help solving the Catalan issue. The opposite is true.

The other side

On the other side of the fence, as most prominent among the Catalonia separatists emerged Carles Puigdemont, also a right wing politician and a controversial personality, accused of questionable management of public funds. He and his party dragged the separatist issue to its limits, eyeing domination on Catalan politics and at the same time seeking to secure political protection from the ongoing investigation about his dubious management of funds.

Presumably the separatists expected a compromise with Madrid, with a face saving solution for them, presumably agreeing about an autonomous regime of some kind. This would have been enough for them to also ‘correct’ by themselves the region’s faulty public accounts. Yet, they were negatively surprised by Rajoy’s brutal reaction, who grabbed the opportunity to cement the position of his minority government, at the expenses of all Catalans. Now however, after the 21 December election, which favored the separatists, the deadlock is as gloomy as before, with no light at the end of the tunnel. Spain is the fourth largest economy of Eurozone. The euro area is comprised of 19 EU member states (Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain).

Saved by the economy

Fortunately the economic scenery in the entire euro area is much more encouraging than the prevailing tricky political conditions. By the end of 2017 the euro area accomplished a three years period of continuous growth. Economic recovery is actually strengthening lately, creating a positive environment for the European Central Bank to soon stop pumping into the financial system tens of billions of newly printed euros. As things stand now the ECB is thought to stop next September injecting into the Eurozone banks €30 billion a month, down from €60 billion last December. Since March 2013 the ECB has printed and distributed €2.3 trillion under its extraordinary Asset Purchase Program.

Along the lines of this super accommodative monetary policy, the ECB has also cut down to zero the interest rates charged to banks’ multibillion refinancing operations. Primarily, all that money for free had as target to keep the euro area banks alive. As secondary effects this policy has helped the over-indebted countries to cheaply refinance their obligations. It also kept the euro/dollar parity suppressed, in support of exports and growth.

Missing the opportunity

In this way, the ECB has created a positive economic environment for the politicians, to take advantage and reverse the prevailing negative social environment. In our European welfare society, a large part of the working population and the unemployed live in exclusion and poverty. Alas the mainstream political forces have so far missed this opportunity. Instead they have opened the door to right wing extremist groups, to greatly increase their audience and even participate in government, as in Austria.

In conclusion, the economic upturn of Eurozone albeit weak, has so far enabled the governing political elites to withstand the social pressures, for more equitable growth. A large part of the population though, called ‘the left behinds’ increase their pressures demanding a reverse of the injustices brought about by twenty years of globalization and the reign of banks. Taxing labor earnings much more heavily and thoroughly than corporate profits and favoring the continuous worsening of incomes and wealth distribution – to the detriment of those who really produce – seem to have reached a political dead end. Minority governments cannot last long and will be followed by God knows what. Unscrupulous populists are omnipresent, getting stronger and waiting for a chance…

 

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