21 July 2015

Open Europe: Could there be political contagion from Greece?

As the dust settles following the latest agreement between Greece and its creditors it is worth stepping back and examining what it, along with Syriza’s time in office so far, might mean for other peripheral countries and other rising populist parties in Europe.

Spain – a blow to Podemos?

The obvious country for comparisons is Spain given the rise of Podemos. This is worthy of an entirely separate post (which will in fact be forthcoming soon) but there are a couple of initial points worth noting. As a poll released over the weekend showed, the failure of Syriza to live up to their promises and their close relationship with Podemos does seem to have had some effect. In January, Podemos were polling at 21.1% and forecast to get 89 seats in parliament, this has now fallen to 15% and 41 seats. This is certainly a result of a number of factors, not least the economic recovery in Spain. However, sharp falls in support in March (after the 20 February agreement to extend the Greek bailout) and again this month suggest that Syriza’s lack of progress and capitulation are feeding through in Spain. (Update: as pointed out by @huopainen this is just one poll, and the recent drop is not yet showing across the board, time will tell whether there is a sustained impact from Syriza on Podemos).

Nevertheless and unsurprisingly, Podemos has begun its pushback (showing they are at least concerned by the potential political contagion) with its leader Pablo Iglesias saying (as we predicted):

We have a great friendship with Syriza, but luckily, Spain is not Greece…We’re an economy with much more weight in the Eurozone, we’re a country with a stronger administration and with a better economic situation…The circumstance are different and I think it makes no sense to draw parallels.

Furthermore, the party has also sought to distance itself from some of Syriza’s key ideas – such as debt restructuring. However, this may not be sufficient to stem its decline. Ultimately, the case for having more leverage is tough to make if Podemos are also unwilling to leave the Euro. This undermined Tsipras and could do the same to Podemos. The fundamental message of Syriza’s failings so far is that it is very hard to deliver on promises of changing the nature of the Eurozone and the terms of membership. Podemos has been making similar promises and it seems people will inevitably question them in the run up to the Spanish election in November.

Italy – making life harder for Renzi?

While comparisons with Spain are expected, the impacts could actually be more interesting elsewhere, for example in Italy. As we have noted before, Italy is already one of the most anti-Euro countries. There are two relatively large parties in opposition – Lega Nord and the Five Star Movement – who are calling on Italy to leave the Euro. The increased austerity, perceived trampling of democracy and economic crisis in Greece will only help feed their case. It’s also worth noting that this combination of parties also allows the Euro to be attacked from across the political spectrum in Italy – Lega Nord from the nationalist/sovereignist side and 5-Star from the anti-austerity side.

Furthermore, the events in Greece could also damage Italian Prime Minister Matteo Renzi. While in other countries the voices for changing the nature of the Eurozone are from outside government, in Italy it comes from Renzi himself – who wants more flexible fiscal rules and more attention to investment and growth. We heard countless times during the Greek saga Renzi calling for greater discussion of the wider Eurozone and maligning the fact all the focus was just on Greece. Syriza’s failure to change the Eurozone may reflect badly on his optimism and promises that it can and will change.

France – could Le Pen be the big winner in all this?

There is also a case to be made that this deal could strengthen some of Front National Marine Le Pen’s criticisms of the Euro – namely that it promotes austerity and is undemocratic. As noted above it could provide further ammunition for the case in favour of leaving the Euro. Furthermore, as I argued for Politico last week, this remains a very German deal and entrenches the German approach to the crisis. While French President Francois Hollande did push back and achieved his goal of keeping Greece in the eurozone it could easily be picked up as another indicator of declining French influence in the eurozone and EU, which Le Pen would surely team with her nationalist stance.

Full article on Open Europe

'Podemos: Down but not out' on Open Europe

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