The few lessons from Europe’s elections

It’s hazardous to see elections to the European Parliament as a barometer of European Union politics. Turnout was higher than in previous EU elections, but still only about 50%; voters in many countries aren’t sure what the parliament does; national anxieties predominate. In many ways, ballots have just been cast in 28 separate national elections, rather than in a single European contest. This shows how far the union still has to go in shaping a political identity for the bloc as a whole.
Indeed, the politics of the new parliament will be even more muddled than of late. Traditional center-right and center-left parties look set, as before, to form the largest groupings in the new assembly, but their support has continued to slide. Greens and liberals did well — but, in many countries, so did populists, even though their support failed to surge as broadly as their leaders had hoped. Britain’s new Brexit Party mustered an enormous protest vote against EU membership, as support for the UK’s ruling Conservatives plunged. In France, according to early results, Marine Le Pen’s far-right National Rally pushed Emmanuel Macron’s Republic on the Move into second place. Across the union as a whole, anti-EU parties made gains, but fell short of overthrowing Europe’s political mainstream.
After these elections, Europe’s old political center is far from dead — but it sure isn’t thriving. The correct response to the challenge confronting centrist politics has both national and EU components. Addressing the union’s lingering economic malaise is crucial.
Unemployment rates are higher in most EU countries than in the US. That’s partly due to ill-conceived labour-market policies, including high minimum wages and unduly rigid employment contracts. But it’s also due, in many countries, to lack of demand. Here the euro area has put itself at a structural disadvantage. Europe’s single currency makes it impossible for the European Central Bank to deliver strong monetary stimulus where it’s most needed, and exchange rates can’t adjust to take the strain. Better cooperation on fiscal policy could have mitigated this problem, but EU governments have been unable to agree how.
Ten years after the Great Recession, the EU’s banking union is still unfinished. The framework for fiscal policy is fundamentally unreformed. An EU-wide unemployment insurance system — which would be a fiscal stabiliser in downturns, automatically providing stimulus where needed most — is nowhere in sight. Without these defenses in place, and monetary policy all but spent, the next recession is capable of causing far greater economic and political damage than the last one.
Policy on migration suffers from a similar mismatch, and polls suggest that concerns over immigration rank highest among populist voters. The EU is committed to free movement of its citizens within the union, but the union has failed to build the common external-border policy. A comprehensive EU-wide immigration policy, one that’s fair and seen to be fair, will be vital for turning back the populist tide in countries such as Italy.
Europe’s governments need to address the persistent tendency to combine overreach and underreach. Focus on the essential and set the inessential aside. Complete the single currency system with the fiscal and financial arrangements that are vital for Europe’s well-being — then step back where possible to leave national governments in charge of national policy, and fully accountable to their citizens. A smarter division of labour between the EU and its member nations can send its populist insurgents back to obscurity.

—Bloomberg