A Look at the Eurozone After the Vote on Scottish Independence: More Fissures on the Way?


By Harald Malmgren

Eurozone politics are currently being reformulated as the result of a rise in right-wing economic nationalism sentiment and growing Euro-skepticism.

In Germany, the FDP pro-market, conservative minority party had for decades been an important counterbalance to left socialist pressures in German economic policy.  Today, the FDP has essentially evaporated, and been replaced as a vital swing party with over 12% voting share, the Alliance for Deutschland (AfD), which is fundamentally skeptical of the benefits to Germany of membership in the Eurozone, and antagonistic to much of the social democratic political bias of most of the European Union, including especially the European Commission in Brussels.

For the time being, the CDU/CSU coalition with the SDP can ignore the AfD, but in the future, if the CDU/CSU were to regain majority, it would have to find accommodation with AfD to govern.

The Liberal Party in the United Kingdom has collapsed, and in its place the United Kingdom Independence Party (UKIP) is on the rise.  UKIP is another right-wing, Euroskeptic, anti-immigration, nationalist grouping which will tend to pull the Conservative Party further into its already growing Euroskeptic stance.

UKIP’s rise does not necessarily mean increased likelihood of British exit from the EU, but it does mean stronger pressure from the UK government on European leaders to renegotiate many aspects of the various European Treaties. 

Chancellor Merkel also needs to rein in the growing bureaucracy and significant intrusions on national sovereignty by the European Commission in order to retain her own popularity in Germany.  She is eager for the UK to press for renegotiation and restraint of the ambitions of the lesser nation state members of the EU, which would help Merkel in dealing with the French, Italians, and others.

The right-wing French National Front Party (FNP) scored a political shock when it gained a large number of seats in the May European Parliament elections.  Since then, the FNP and its leader Marine Le Pen have been gaining popularity at both the municipal and national levels as popularity of French President Hollande has plummeted.  The FNP is fundamentally antagonistic to the EU and supportive of assertive economic nationalism.

The prolonged European economic slump, which followed the 2008 post-Lehman global financial crisis, has been characterized by extraordinary fiscal austerity policies imposed by the EU Commission under the domination of Germany.  After the Euro financial crisis and the ECB’s promise to do “whatever it takes” the EZ banking system and sovereign bond markets seemed to recover, but now the EZ is evidently falling back into recession.

Voters in most of the Eurozone nations are balking at continued fiscal austerity and sustained, abnormally high unemployment.

Rising Euroskepticism should not be surprising in most of the EZ.  Even the Netherlands, normally a staunch supporter of German fiscal austerity pressures, is suffering growing nationalism sentiment.

The EU and Eurozone are not only showing fault lines of potential political earthquakes along national borders, but cracks are becoming deeper and wider within many of the member states.

Political forces of decentralization, fragmentation, localization can be seen in many geographic regions throughout the world.

Devolution of power is a growing response to economic slowdown and recession, encouraging devolution of power from the center to the periphery not only among nations but within nations.

This is a time not only of “Clash of Civilizations” but also a “Clash Within Civilizations.”  In Europe, long forgotten histories of linguistic, religious, and tribal differences are being revisited, and sovereign borders are again being brought into question.

Putin’s seizure of Crimea from the Ukraine and demand for devolution of central Ukraine power to its geographic regions, with greater autonomy for Eastern Ukraine, is another manifestation of growing skepticism of the legitimacy of present national borders – borders which, after all, were redrawn many times in recent decades, and not only in centuries past.

The recent failed attempt of Scottish independence was an historic marker for the United Kingdom, but other attempts at greater autonomy are emerging. 

Most notable is Catalonia, the political leaders of which are demanding autonomy from Madrid and national independence.  Belgium, historically continuously divided between Flemish and Walloons, continues to exist on the edge of national divide, with separate budgetary functions and never-ending sovereignty disputes.

Political fractures are appearing in unexpected places like Venice, which seemingly wishes to return to the historical autonomy of the Venetian Princes, Sardinia which is tilting towards greater autonomy from Rome, and Greenland, which finds itself on the edge of a boom in resources sought by China as well as its parent, Denmark, which wants to be the new Norway.Nationalism, tribalism, ethnicity issues are returning in Hungary and its close neighbors, and continue to fester among the Balkans.

For the foreseeable future the response of national governments in Europe will be to yield greater local economic and political autonomy, eroding the authority of national governments at the same time that the elites of Europe seek greater economic and political integration of the European Union.

Viewed from this perspective, and mindful of not only decades but centuries of frequent redrawing of sovereign borders in Europe, it is not surprising that the EU is suffering an identity crisis, elites pulling in one direction toward integration and universalization, and people in the cities, villages, and countryside pulling in another, increasingly dissatisfied with failure of the single European future to provide evident benefits during prolonged economic malaise.

The Eurozone is in an historic period of economic and political decline. 

Nationalism is on the rise, unlikely to be contained by either well-intentioned or ill-intentioned greater integration of economic, social, political, or security integration.  In this context, the economic downturn will likely regenerate a return of the EZ financial crisis.