The Daily Reckoning UK

Get Ready For A Europhile Backlash

Pieter Cranenbroek

by

Posted 16th February 2017

After Brexit and Trump’s election win, there’s been a lot of talk about the Old Order being overthrown.

Many expect the same to happen in Europe where Eurosceptic parties on the fringes have been gaining ground.

Marine Le Pen looks set to win the first round of the French presidential elections, Geert Wilders is leading the polls in the Netherlands, while the Alternative for Germany (AfD) party is polling third at the moment.

Marine Le Pen in particular has investors spooked. Not only does she want to take France out of the euro and hold a referendum on the EU, she’d also like to redenominate French government debt in the new national currency.

Since that would basically mean France defaulting on its debt, Eurozone bond spreads widened after polls showed a small increase in Le Pen’s electoral chances.

In Germany, Chancellor Angela Merkel no longer looks untouchable. She can still produce decent approval rates but the refugee crisis has bruised her, with the far right party AfD standing to gain from people’s anxieties.

If all of this were to unfold then 2017 could indeed be the year Eurosceptic populists buried the European dream. That’s the dominant narrative.

Yet, this fails to take into account the far more likely possibility that this year could end with two Europhiles in power in both France and Germany.

Although Marine Le Pen will almost certainly get through the first round of voting in France’s presidential election, she’s highly unlikely to win the second round (a run-off between the top two candidates of the first round).

The latest poll shows that Le Pen’s likely challenger, the centrist Emmanuel Macron, would get 62% against Le Pen’s 38%.

Now, you may be thinking “Yeah, but the polls got it completely wrong on Brexit and Trump.” You’re right, they did.

But this far out from the respective votes neither Leave nor Trump were trailing by anything like as much as Le Pen is. If she does take the French Presidency, it would be the biggest shock yet.

This isn’t just a theoretical notion. There’s a precedent of French voters uniting against the far right.

In the regional elections of December 2015, Front National received most votes in six out of France’s 13 regions in the first round. However, mass tactical voting ensured the FN didn’t win a single region in the second round.

Emmanuel Macron has emerged as the favourite to win the election and he’s been campaigning on a platform that is unapologetically pro-European.

Macron served as the minister of Economic Affairs in Hollande’s socialist cabinet until he left last year to found his own political movement, En Marche ! (Forward!).

“It’s funny to see that Macron is considered by many as the ‘anti-establishment’ candidate while he is maybe THE candidate of the system,” a colleague from Agora France told me.

My colleague is talking about the fact that, besides being a former government minister, Macron used to be an investment banker at Rothschild. He also attended ENA, which is comparable to Oxbridge except even more elitist.

Still, by campaigning on a centrist agenda Macron does offer the French electorate an alternative to the socialists and republicans that traditionally fight out the elections. Polls show him beating Le Pen comfortably in the second round on 7 May.

“He’s young, liberal, comes from the private sector and loves entrepreneurs. And he’s convincing people from the right and the left,” is how my Agora France contact explains Macron’s success.

“I’d bet on him.”

If Macron ends up winning, then France could elect its most pro-European president in decades.

The rise of a Eurofederalist

Meanwhile in Germany, Merkel faces strong competition for the first time since assuming power in 2005.

Unlike in France the threat is not coming from the Eurosceptic far right.

The far right AfD will easily reach the minimum required 5% threshold to get seats in the German parliament, but the party won’t come anywhere near power. The latest polls show they’ll get about 12% of the vote.

The real threat for Merkel comes from the left.

In Martin Schulz the centre left Social Democratic Party (SPD) has found a strong challenger. Since Schulz became party leader last month, the SPD has climbed 8% in the polls.

Merkel’s Christian Democratic Union (CDU) is still the biggest party, but if Schulz’s star keeps rising it could become a very close contest.

Now, Merkel’s CDU and Schulz’s SPD currently form a coalition government, so why would this matter?

Schulz is very much a Brussels insider and about as Eurofederalist as it gets.

He gave up his position as President of the European Parliament to run in this year’s election. He had been a Member of the European Parliament since 1994.

And polls show Schulz ties with Merkel when asked who Germans prefer as their next Chancellor.

As Germans won’t go to the polling station until September, a lot can still happen.

Still, Germany could very well elect a new Chancellor come September, who’s much more in favour of deeper integration, including a European banking union that current finance minister Wolfgang Schäuble very much detests.

There’s a distinct possibility that by the end of this year, despite everything that’s happened, the two biggest EU member states will be headed by the most pro-European leaders since the founders of the European Coal and Steel Community in 1951.

I’m not saying Macron and Schulz will definitely win, but I’d estimate their chances much higher than Le Pen and Alternative for Germany winning power.

If they do win, they could take the EU in the direction of ‘ever closer union’ as they generally believe overcoming the EU’s problems requires more integration, not less. What’s more, Macron and Schulz would have ample motivation to take the European project towards deeper integration.

So what would be the implications? Three immediately spring to mind.

Firstly, the borderless Schengen zone and the single currency are projects that the EU is unlikely to give up. Under Schulz and Macron we could see the EU moving towards closer cooperation to overcome the problems in these policy areas.

Secondly, if the EU is really seen headed towards deeper integration, then it might convince a bigger part of the British electorate that bowing out of the EU was the right decision.

The third one is that Euroscepticism is unlikely to go away of its own accord. This move could fuel Euroscepticism even more and create an even bigger revolt against Brussels.

At the same time it’s interesting to see that the rise in Euroscepticism has provoked a backlash with people now more openly defending the European project than before.

And it’s not inconceivable that, after Britain leaving and in a time where the American and Russian presidents appear hand in glove, the remaining EU member states realise they need each other more than ever.

Whichever way it goes is anyone’s guess.

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