Statements from French and Dutch officials made over the weekend reveal growing concerns about the social and political effects of Europe's economic crisis. On March 3, French Minister of Industrial Renewal Arnaud Montebourg said the European Central Bank is "not dealing with growth. It's not taking care of the unemployed. It's not taking care of the European people. And it has a duty to do so." On the same day, Dutch Labor Party leader Diederik Samsom, whose party is part of the ruling coalition, said the Netherlands probably will not meet the European Union's budget deficit target this year because the Dutch economy is already in recession and further austerity would only deepen the economic crisis.
Trouble in the Core
France and the Netherlands find themselves in similar circumstances. Both countries were founding members of the European Communities, the predecessor organizations to the European Union. Both are located at the economic core of the Continent, and both belong to the group of countries that were relatively less affected by the European crisis. Both countries also began to feel the effects of the crisis more strongly in recent months. The Dutch economy is currently in recession and is expected to further contract, according to forecasts by the European Commission, and France is in the process of economic deceleration, with growth prospects below 1 percent this year. This economic change is bringing about a political repositioning in Paris and The Hague.
During the first stage of the crisis, France and the Netherlands were allied with Germany in demanding economic reforms and austerity from countries in the eurozone's periphery. Although France itself was not immune to the effects of the crisis, former French President Nicolas Sarkozy's government chose to preserve its close relations with Germany, and Paris rarely criticized the austerity measures proposed by Berlin. In the Netherlands, Dutch Prime Minister Mark Rutte's support for austerity measures led to the fall of his government in April 2012.
Since then, the political environment has changed in both countries. Sarkozy was replaced by Socialist Francois Hollande, who had campaigned against austerity in Europe, and Rutte formed a new government with the Labor Party, which typically opposes spending cuts. But the social environment has also changed. The continued growth in unemployment has sparked protests and political crises across the Continent, especially in Spain, Greece and Portugal.
Most important, the political deadlock that followed the recent elections in Italy — the eurozone's third-largest economy — and the strong performance of the Five Star Movement have shown that social unrest could fuel the growth of anti-establishment parties. In this context, France and the Netherlands are beginning to fear that social unrest and political instability could spread quickly from the periphery to the center of the eurozone.
One anti-establishment party has already emerged in the eurozone core. In Austria, the country with the lowest unemployment rate in the eurozone, Frank Stronach — an Austrian-Canadian businessman turned politician — is benefitting from the criticism against the political elite, which has been involved in numerous corruption scandals in recent years. Team Stronach, the party he founded in September 2012, won 9.8 percent of the vote in Lower Austria and 11.3 percent in Carinthia during the March 3 regional elections, and it is set to compete in national elections later this year. Team Stronach's electoral performance took place only a week after the success of the Five Star Movement, led by a professional comedian, in the Italian elections — a confirmation of the crisis of legitimacy facing some of Europe's traditional parties.
Internal Challenges
For both France and the Netherlands, the economic crisis aggravated existing Euroskepticism at home. In France, the far-right National Front won 17.9 percent of the vote in the 2012 presidential election, becoming the third-most popular party in the country. Recently, National Front leader Marine Le Pen demanded that France abandon the euro and the Schengen area. Le Pen also said that France's membership in the European Union will be the central issue in her campaign during the European Parliament elections, scheduled for mid-2014.
In the Netherlands, the Party of Freedom — known for its strong anti-EU and anti-immigration stances — has consolidated itself as a major political party since the beginning of the crisis. Although the party lost support recently, winning 10.1 percent of the vote in the 2012 elections compared with 15.5 percent in 2010, its electoral performance could rapidly improve if the crisis deepens in the Netherlands. The leftist Socialist Party, which also won around 10 percent of the vote in the 2012 elections, is seen as Euroskeptic and opposes the European Union's budgetary rules.
The economic crisis has not affected France and the Netherlands to the same degree as it has the European periphery, but Paris and The Hague are concerned that the social and political deterioration observed in countries such as Greece and Spain will emerge in the Continent's north. In this context, France and the Netherlands are likely to urge Germany and the European Union to relax their drive for further austerity measures.
Germany, meanwhile, has to find a delicate balance between providing economic assistance to the eurozone and ensuring that the countries that share the common currency make structural reforms. The European Union and eurozone are vital to Germany's economic stability. But Berlin is facing mounting anti-German sentiment and is having trouble keeping all countries committed to deeper European integration while promoting austerity and structural reforms.
France and other countries are pressuring German Chancellor Angela Merkel to become more accommodating to the rest of the eurozone's needs. However, giving in to these demands could weaken her image domestically ahead of German parliamentary elections in September. The degree to which Merkel accommodates the other eurozone countries will determine the unity of the bloc going forward, and possibly her domestic political fortunes as well.
