2 February 2015

The victory of Syriza in Greece, rise of Podemos in Spain and steady performance of Le Pen in France have led some to ask whether the wave of anti-establishment movements will help or hinder Cameron’s renegotiation plans.

Given the number of forces at work, it is not entirely easy to tell. The push-back against EU policies in various forms – EU-mandated austerity, bailouts, immigration – and plummeting trust in Brussels, suggest change to reconnect the EU and national electorates is desperately needed. At the same time, many of these parties – whether Syriza on the left or Front National on the “right” – are outright opposed to Cameron’s vision of an economically liberal, outward-looking EU.

Here is how the populist wave could impact some key issues.

A grand bargain on EU reform

The rise of Syriza and Podemos in particular, have made Eurozone politics even messier and harder to manage. This could suggest that time and patience for the UK’s EU reform demands is even more scarce than before, as Lord Lamont argued in the Sunday Telegraph, for example. However, precisely because the Eurozone is so messy, the last thing EU leaders – particularly Angela Merkel, a.k.a EU-1 – want to do is to add a Brexit to the mix. As I argued in the Telegraph a few weeks back:

If Germany is scared of losing the UK now, it should be petrified about 2017. First, for Berlin, being left alone in the EU with an assertive Mediterranean bloc is becoming an increasingly scary prospect.

EU treaty change

Former Swedish Foreign Minister Carl Bildt did the media rounds in London the other day, telling people that “If you open up treaty change you haven’t clue what [Syriza] will put on the table. The appetite for treaty change has diminished even further.” Actually, it is not so much what Syriza will ‘demand’. It’s more that a German-style Treaty change, trading cash for stronger budget supervision  (and the UK using it as a hook for some demands of its own), may be more difficult to pull off. Podemos and FN will certainly turn it into a key campaign issue. On the other hand, the Germans themselves may become keener, given that the basic German desire for an EU treaty change is ultimately about a lack of trust with others in the Eurozone. Remember, that’s how the 2010 EU treaty change happened. No one had ‘any appetite’ for a treaty change, but the Germans needed it as domestic political cover for the bailouts. So it happened anyway.

Economic competitiveness

That the anti-establishment parties around Europe have a rather protectionist outlook is a potential problem for Cameron, given his ambition to liberalise the single market and strike free trade deals with the rest of the world. Over the weekend, a Greek government minister said the country’s Parliament would definitely veto the flagship EU-US trade deal (TTIP). Greece is small and it will take more than a Syriza-victory to make the centre of gravity in the EU more protectionist. If Podemos – that also opposes TTIP – makes it in to government or kingmaker position in the Spanish elections this year, we would see more of a serious anti-austerity, anti-free trade coalition in Europe.

Strengthening national parliaments

The Eurozone is facing an outright clash of national democracies. However, it’s hard to predict whether this will in the end mean that national parliaments get a stronger role in the EU – not least since voters in the Mediterranean trust their national politicians even less than they do Brussels.

So on net, I would say Berlin fears Brexit more now than before, which strengthens Cameron’s hand. But it’s also clear there’s a strong push-back against economic openness, which could spell trouble for EU reform.