As austerity measures kick in and the euro zone debt crisis begins to really bite voters where it hurts, in the pocket, extreme political parties are becoming mainstream, warns Dylan Grice, a strategist at Societe Generale in Paris.
“We are told not to underestimate the commitment of member policymakers to the euro, but what happens as economic hardship within the euro zone changes the attitude of the electorate?,” Grice said in a research note.
“As recent and upcoming elections in the single currency area show, the euro is already becoming a lightning rod for parties once seen as extreme, but now increasingly seen as mainstream,” said Grice.
“Europe’s political landscape seems to be shifting markedly. Every time I open a paper at the European politics section, the whiff of nationalism grows stronger. This is entirely consistent with the economic stress within the euro zone,” he said.
“For all the talk of austerity, the fiscal time bomb built into European governments' unfounded pension and health care systems have yet to be felt. The economic climate is therefore likely to become ever more fertile for a far right anti-foreigner ideology,” said Grice.
In France, Jean-Marie Le Pen’s Front National party is making major gains in the polls, winning 40 percent of the vote in some runoffs for local elections, something President Nicolas Sarkozy knows only too well.
“The far right has traditionally been anti-outsider. When outsiders were immigrants, they were anti-immigrant. But in the euro zone today, a new fault line is emerging. The growing suspicion of outsiders poses unusual problems for the single currency because when it comes to monetary affairs, every single member country finds itself dominated by outsiders!,” said Grice.
Le Pen is calling for a return to national currencies to "liberate the people" and Grice believes this view is gaining traction.
“In Finland, the True Finns have come from nowhere to begin looking like future government members. Though the party is keen to strut its anti-immigrant stuff whenever it gets the chance, hostility to the European Union and the bailouts of southern European members is its signature position,” Grice said.
“Are we going to have to pay for the whole of Europe?" asked German daily Bild recently. The same paper polled its readers and 35 percent would today vote for a political party that promised to adopt the deutsch mark”
We are two years into the euro zone debt crisis and Grice believes it is only just getting started.
“I believe what we are seeing is the beginning of the euro zone’s credit crisis, not the end. The historic and psychological evidence clearly links economic dislocation with the scapegoating of out-groups and, of course, the euro zone edifice stands increasingly lonely and tall as a lightning rod for the latter,” Grice said.
“I believe the likelihood is that over the course of the next decade or so, the trend will be towards greater fiscal problems and greater economic problems. I believe these problems will increase the temperature of debates about whose fault it all is, and that as the conclusion to these debates becomes more polarized, they will play into the hands of nationalist, anti-immigrant and increasingly, anti-euro sentiment,” he said.