The Decline of Western Europe?

Anton HemerijckThe social crisis has reared its head in Western Europe, and as a result, nationalism as well. If elections were held today in the Northern European countries, such as the Netherlands, radical, nationalist parties would win. The anti-European Union sentiment are strengthening in France, Finland, and moreover, in Germany. If this goes on, the European Union could collapse – warns us Anton Hemerijck, who is Vice-Rector and Dean Faculty of Social Sciences at the VU University of Amsterdam.

According to one of the most prestigious expert of the economic and social sciences, the remedy for the crisis can only be a harsh, definite pan-European political and economic intervention, like the European Central Bank (ECB) did in order to resolve the monetary, financial crisis. However, national governments are unwilling to adopt such pan-European policies for the present because nationalist parties try to convince people to find a solution at national level. The social and political dimensions of the crisis seem to broaden unstoppably.

Zentai Péter: Five years have passed since the start of the financial crisis. Still, the social and political aspects of the crisis affecting everyone are going to erupt just now. If I am right, this is a significant time-lag…

Anton Hemerijck: You can see everywhere in Europe that due to the efforts of the past five years, the euro and the financial sector may have been saved. However, this is triggering significant social hardship across the European Union. My hunch is that in the kind of growth strategy that we use right now is not going to alleviate the hardship very soon. While everybody is focusing exclusively on financial stability, the social consequences of the crisis will become politicized – even in Western Europe. The elections of the European Parliament will be a bit of a stress test in that perspective. Till then, the social crisis can deepen further and radical, especially right-wing politics can gain more support.

How would you explain this – assuming that it happens – in so much different countries like your homeland the Netherlands and my homeland Hungary?

Undoubtedly, different countries have their own vulnerabilities from the crisis: European Union is basically divided into debtor countries, such as Greece or Italy, which are struggling to pay their debts back and creditor countries, such as the Netherlands and German, which are . But what is similar in all countries is that the political space is becoming increasingly nationalistic.  A European solution for the euro problem may be blocked by the resurgence of all kinds of nationalisms across Europe.

I do not understand this… Your homeland, for instance, is one of the most multicultural and cosmopolitan countries of Europe. It has always been the home for various nations and religions. Nationalism in the Netherlands?

The Netherlands, in a sense, has been a very multicultural society for centuries: Catholics and Protestants, later immigrants and the Dutch have lived and worked together peacefully.  For a long time, it has gone well but in times of austerity, nationalist sentiments are mobilized. The people feel that the political elite is not able to cope with the social aspects of the crisis, like unemployment. The radical right with nationalist sentiment primarily targets the white population of the middle-class and the low-middle class. The message of the extreme right is, however, incomparable to the bloody nationalism of the 1920s and 1930s in Germany; Gert Wilders (the leader of the Dutch radical right) cannot hold a candle with the former fascists. Nevertheless, these kinds of sentiments of Western Europe hinder the necessary pan-European solution for the social crisis. Basically, they oppose any pan-European solution and an increasing share of the public shares their opinion – so much so that Wilders in Holland and Mrs. Le Pen in France became politicians with the largest public support. It is very difficult to predict what is going to happen but if the sentiments at the national level reach the tipping point when it becomes very anti-European, then any European solution is not going to be supported – not even by centrist governments. Then we are in real trouble.

What should this pan-European social and political crisis management be like?

The monetary problem of the euro seems to be solved in a way. Why? Because the European Central Bank has moved on and undertook actions that that would have been impossible two years ago: it became a lender of last resort, printed money and intervened – sometimes by breaching the Constitution. This has calmed markets down. However, the fiscal problem has not been solved. For this problem, two things are need: a safety net for bad banks and a safety net for the interaction between bad banks and government debt. The lack of a common fiscal policy causes worries across Europe. It is very likely that with a new grand coalition in Germany – even if not initiated by Germany – some of these European solutions will be put on the table and a pan-European, fiscal union evolves that connects national budgets. Although it is far too early to talk about euro bonds, this would stabilize the fiscal side of the European Union. As the U.S. realized that there is no other alternative for preventing social crisis than printing money and triggering growth, Europe should also realize that it should take drastic steps toward a pan-European solution. In Europe, the sentiment is – which is predominantly true for Germany but also for many other Northern countries – that although they want growth, they want stability more. The problem is that the more they hang to stability, the higher the risk is that they are entering a pyramid of low growth, meaning that the unemployment problems are not going to be resolved soon. A growth strategy that does not create jobs is going to backfire into the political arena.

The Hungarian government suggests finding a solution at national level. If Europe, the Union is not able to respond effectively to the challenges, we Hungarians are going to take action. Do you think it is the right attitude of an anxious European government?

Every government that is in power – whether they are nationalist or centrist – is supposed to calm down electors. This is also happening in the UK right now. However, the euro-side of the story is different. Neither Hungary nor the UK is part of the Eurozone. They have independent monetary and thereby also fiscal capacities. In the Eurozone, the monetary policy is completely in the hands of the ECB and is tied to a very strict fiscal policy. So there is little room for maneuver. It is impossible to come up with own solutions for financial and fiscal problems. At the same time, the countries within the Eurozone are affected by the social consequences of the crisis as much as the countries outside the Eurozone. The social crisis cannot be solved within the national states because of low growth – unless it becomes job-intensive. At least a two-percent growth but preferably more than a three-percent growth is needed in order to create more jobs. The positive side of the aging societies is that growth does not have to be too high to have labor market effects. We have to make sure that we do not waste human capital we did in the 1980s and 1990s.

What about the immigrants? The more intensive immigration is, the more support radical and extreme parties gain…

So much so that if there were to be elections today, Wilders’ party would win. In that case, however, we could be sure that the other parties on the left, right, and center would join forces and create a some kind of majority governments – although small majority government – and hinder Wilders to come to power. This kind of alternative is present in all of the European countries. Last years’ Greek elections also seem to prove this: despite the expectations, the powerful extremes could not win. When push comes to shove and there are anti-European campaigns and, in the end of the day, there is a referendum about staying in the EU or not, all of the countries of the Eurozone will stay in the euro. But this could put a lot of pressure on governments and the European Union to start to worry about the unemployment crisis. Thus, the problem of immigration could be handled by a growth stimulating political, financial and economic program, as well. The Northern and Western European countries fear that their national existence is threatened by particularly the immigrants from other EU member states (especially, from Southern and Eastern Europe). For that, we need European solutions, again. The EU should promote employment intensive growth in the labor exporting countries and create a circular migration program in order to make it possible for the young people to go back to their home country.