Europe’s political centre is starting to crumble, replicating the pattern of the early 1930s as the crisis ground into its third year under a similar mix of fiscal and monetary contraction.
François Hollande vows to tear up the EU fiscal compact and bring the ECB to heel Photo: AFP
8:14PM BST 24 Apr 2012
Elected governments have already been swept away – or replaced by EU technocrats without a vote, indeed to prevent a vote – in every eurozone state where unemployment has reached double-digits: Spain (23.6pc), Greece (21pc), Portugal (15pc), Ireland (14.7pc) and Slovakia (14pc).
The political carnage has been striking. Ireland’s Fianna Fail, creator of the Irish free state, has lost every seat in Dublin. Greece’s Panhellenic Socialist Movement (PASOK) – torch-bearers of Greek democracy since the Colonels – has fallen to 14pc in the polls and faces ruin next month.
This week the tornado has smashed into the core, bringing down Holland’s govenment and probably the French leader Nicolas Sarkozy as well in a cacophany of anti-EU diatribes.
Keynesians blame budget cuts, convinced that the pace of fiscal tightening – a net 2.5pc of GDP in Spain and 3.5pc in Italy -is beyond any sensible therapeutic dose, and already shown to be self-defeating in Greece, where economic collapse has left the deficit stuck near 10pc.
Monetarists blame the European Central Bank, accusing Frankfurt of tipping half of Europe back into slump by responding to last year’s oil shock with rate rises. The effect was to compound drastic falls in real M1 deposits across Club Med, and trigger a credit crunch just as banks were slashing balances sheets to meet new rules. While the ECB has since launched its €1 trillion liquidity blast, this is not quantitative easing and has toxic side-effects.
The results are in: the hard-Left and hard-Right are on the rampage across Euroland. We have not reached breaking point of July 1932 when Nazis and Communists won over the half the Reichstag seats. That tragedy was the fruit of the Brüning deflation, rigidly imposed to uphold the Gold Standard – the euro’s trial-run.
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- Europe’s elites feel the backlash (guardian.co.uk)
- Europe’s austerity backlash gains traction (business.financialpost.com)
- Hollande gains upper hand over Sarkozy in French elections; far right makes big gains (thestar.com)
- Sarkozy says no deal with far-right (rawstory.com)