Originally Published 2014-06-21 13:36:15 Published on Jun 21, 2014
The recent European Parliamentary election shows the rise of the extreme right wing parties. This is something that would hurt Indians living in Europe and UK. Some of these parties are strongly nationalist and anti immigration (racists), free trade and outsourcing.
Rise of the Eurosceptics could hurt Indian interests
The European Parliamentary elections took place last month. The EU, with its 28 members, went to polls from May 22 to May 25 to elect country representatives for the European Parliament in Brussels. A new European Commission will also be in place soon.

What is surprising is the rise of the extreme right wing parties in many of the countries in the EU and the rise of the radical Left in Greece. It reflects the anti EU feeling, now increasingly present in some countries of the Eurozone which opted for a common currency Euro. There is growing dissatisfaction about EU's handling of the Eurozone crisis that followed the Global Financial Crisis in 2008. Both North and South in the Eurozone voted surprisingly — the north, mainly Germany, France and Austria, faced Eurosceptics among their electorate who seemed to be tired of giving more and more money to the South -- Greece, Portugal, Greece, Ireland -- in various bailouts.

In Greece, which has been undergoing unprecedented economic downturn, people expected a vote in favour of Eurosceptics. Both the problems of unemployment and deflation have emerged as important issues. The populist Left saw an increase in support and Syriza, the radical Left wing party, got 26.6 per cent of votes. The highly indebted countries of the Eurozone have had to undergo a series of reforms which meant deep expenditure cuts to bring back the fiscal deficits within permissible range ( 3 per cent of GDP).

The impact of expenditure cuts has been on economic growth which has gone below zero in some cases. Austerity packages have included a cut in health care spending and pensions which has contributed to the slowdown in demand for goods. Slow GDP growth has led to a rise in youth unemployment ( 60 per cent in Greece).

According to British Prime Minister David Cameron, people suffering hardship for years gave their governments ' a kicking'. In Britain, the British Eurosceptics gained in importance and have opposed the idea of further political and economic integration of Britain in the EU. Britain refused monetary integration in the past but now with the rise of UKIP (UK Independent Party) that managed to get 27 per cent of the vote, Britain may say no to further integration with EU in the future. Surprisingly, David Cameron's Conservatives were beaten into the third place and Nigel Farage of UKIP who gained in prominence as its head with his anti immigration and anti EU stance, emerged as a popular figure.

In many of the countries which are seeing a rise of extreme right wing parties, there is a visible downturn. In France, Marine Le Pen's National Front showed a surprising popularity and though she has a distinct anti immigration agenda, she concentrated on the problems that France is facing being stuck to the Euro.

In Italy, the young Prime Minister Matteo Renze's party won 41 per cent of the votes. Renze has promised as Prime Minister that there would be no further tax increase and he has translated his promise into legislation though Italy's budget has overshot the EU mandated target of 3 per cent. Renze has said that though there is a problem with the budget deficit, he would not be taking any emergency (read austerity) measures. He will take long term structural reforms including liberalization of labour laws, privatization and restructuring bureaucracy.

Thus in all the highly indebted countries that were bailed out by the Troika comprising the IMF, European Central Bank (ECB) and the European Commission, austerity measures have caused hardships and has led to an increase in income inequality in some countries. People in the EU according to 'Eurobarometer' survey are feeling much poorer than before.

Greece in particular, when struck with balance of payments crisis and shrinking exports, felt the need to try and solve its own problems through its own monetary policy but it was bound to the euro and could not undertake devaluation. Normally devaluation would have made Greek goods cheaper in terms of dollar, raising their competitiveness and this would have boosted exports. Most of the highly indebted countries also have big current account deficits. Paul Krugman has called the Eurozone crisis a Balance of payments crisis. The affected countries have experienced an import surge against stagnant export growth.

But the ECB is keen on saving the monetary union. Its chief Mario Draghi has said that he would do 'whatever it takes' to save the Euro. The latest move is that ECB will have negative interest rates to encourage investment.

Clearly this recent Parliamentary election shows that there is much discontent in the Eurozone and the member countries want more flexibility in their monetary policy. They want to regain market access to credit. But all of them have had to pay a heavy price in undertaking reforms that have led to discontent. Germany has come out as the biggest donor of funds to the ECB and is in a dominant position, calling the shots. It wants structural reforms in the debt ridden countries that have been bailed out. Angela Merkel has become unpopular as a result in Greece. Her candidate for heading the European Commission is former Prime Minister of Luxembourg Jean Claude Juncker however may win.

But though the extreme rightist parties have become more prominent they are not in the majority, having won only 20 per cent of 751 seats. An overwhelming majority was won by three main blocs of conventional pro-European Union parties—the Centre-right European People's party, the Centre Left Socialists and the centre-centre liberals. The four main party groups that are most solidly supportive of the existing institutions and further integration of the EU have won 69 per cent of the seats in the new Parliament which is down from 80 per cent in the last Parliamentary election. There is no paradigm shift yet.

The rise of the extreme right wing parties is something that would hurt Indians living in Europe and UK. Some of these parties are strongly nationalist and anti immigration (racists), free trade and outsourcing. The lives of the IT workers in Europe who are already handicapped by not knowing the local language would be tougher as they may face more overt discrimination in the future.

(The writer is a Senior Fellow at Observer Research Foundation, Delhi)

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David Rusnok

David Rusnok

David Rusnok Researcher Strengthening National Climate Policy Implementation (SNAPFI) project DIW Germany

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