Real Clear Politics
April 20, 2011
The political consequences for the European Union of bailing out Greece, Ireland and very likely Portugal are disturbingly clear: a rise of populist sentiment around the continent cunningly exploited by nationalist parties once considered on the fringe.
True Finns, a party led by a 48-year-old firebrand leader named Timo Soini, captured almost one in five votes in Finland's recent general election. Given the nature of a political system that makes coalitions unavoidable, the result has placed True Finns in a strong position to be a part of the new government. Although the economic crisis and, to a lesser extent, immigration partially explain this success, Soini made a point in the last few weeks of the campaign of putting much greater emphasis on the bailouts of Greece and Ireland and what he saw as the imminent rescue of Portugal.
In France, the far-right National Front, now led by Marine Le Pen, has surpassed President Nicolas Sarkozy and his center-right party in the national polls, and did well in the recent regional elections. The transfer of wealth from one part of Europe to another has been central to Le Pen's message, overshadowing immigration, the traditional punching bag. In the Netherlands, Geert Wilders, a nationalist leader who has propped up the minority government, is voicing populist sentiments regarding the bailouts too. Although no such leader or party has yet exploited the social frustration in Germany, that country's key role in rescuing southern Europe has led to an electoral revolt against Chancellor Angela Merkel, who lost a major state election in Baden-Wurttemberg. It is not inconceivable that a populist movement will emerge -- or that elements of the mainstream parties, including Merkel's Christian-Democrats, will adopt an anti-EU position.
Things get worse. The rescue packages have simply gained some time for European decision-makers. Portugal's proposed $115 billion package, as was the case with the Greek and Irish bailouts, is designed to let the recipient breathe while reforms are implemented and an economic recovery makes it possible to outgrow the heavy debt. But there is no meaningful economic growth and the debt burden in all three countries is projected to increase. Eventually the bailed-out countries will need to go back to the markets to borrow more.
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