Populist surge threatens euro zone consensus

PARIS Tue Apr 24, 2012 11:45am BST

French election vote estimates of the first round 2012 French presidential election are pictured on a mobile device in front of a television screen showing a speech from Marine Le Pen, National Front Party Candidate, in this photo illustration taken in Lavigny, Switzerland April 22, 2012. REUTERS/Valentin Flauraud

French election vote estimates of the first round 2012 French presidential election are pictured on a mobile device in front of a television screen showing a speech from Marine Le Pen, National Front Party Candidate, in this photo illustration taken in Lavigny, Switzerland April 22, 2012.

Credit: Reuters/Valentin Flauraud

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PARIS (Reuters) - A surge of support for Eurosceptic, anti-immigration populists in the euro zone threatens to upend the mainstream political consensus in favour of austerity and budget discipline.

The prospect of ratifying and implementing a German-driven treaty to enforce European Union budget rules more strictly is looking less certain, just as Europe may be about to lose the dominant "Merkozy" leadership tandem that negotiated it.

Sunday's shock French presidential election first round, in which far-right anti-euro crusader Marine Le Pen scored nearly 18 percent and anti-establishment rebels jointly secured more than a third of the vote, highlighted a wider European trend.

From Amsterdam and Vienna to Helsinki and Athens, voters angry at unemployment and austerity or with the cost of bailing out euro zone debtors are turning to protest parties and making it harder for traditional political forces to govern.

And many are making mainly Muslim immigrants the scapegoats for their economic anxieties, raising tension within ageing European societies depending on immigrant labour and casting a cloud over the EU's Schengen open-border system.

Conservative French President Nicolas Sarkozy, German Chancellor Angela Merkel's partner in European leadership, could well become the 11th euro zone leader to be swept from office since the start of the crisis.

He trails Socialist Francois Hollande for a May 6 runoff and is having to court Le Pen's voters by sounding tough on Europe and promising to slash immigration and crack down on security.

In the Netherlands, the centre-right minority government collapsed on Saturday after Geert Wilders' anti-immigration and anti-euro Freedom Party, on which it depends to pass legislation, refused to endorse deep budget cuts to meet EU deficit-cutting targets.

The fall of a cabinet that strongly backed the European fiscal pact and lectured Greece and other euro zone strugglers on putting their finances in order makes it unlikely that the Dutch will ratify the treaty for months, if at all.

"Although failure by the Netherlands alone to ratify would not in theory spell the compact's demise - only 12 out of 17 euro zone members need to ratify for it to come into force - it would at best significantly damage the compact's credibility and at worst encourage other members to follow suit," said Alastair Newton, chief political analyst at Nomura International.

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Without France, Europe's number two economy, the pact would not be worth the paper it is printed on.

Hollande has vowed to renegotiate the treaty if elected, as a condition for ratification, to add measures to stimulate economic growth such as EU-financed infrastructure programmes to rebalance what he sees as its diet of self-defeating austerity.

The socialist frontrunner accepts the need to reduce swollen national debts and deficits and would not reopen the text, but he argues that euro zone countries will only be able to balance public accounts if they can rekindle growth.

Janis Emmanouilidis, senior policy analyst at the European Policy Centre in Brussels, said the populist backlash in France and the Netherlands would make it harder for governments to reach agreement on euro zone policies and any future rescues.

"So far, we've seen that each time there is a fear of an existential crisis in the euro zone, parliaments find a majority to take decisions at the last minute," he said, even if that meant the fall of a government as in Slovakia last year.

"But yes, it is becoming more difficult and it will become even more difficult," the German-Greek researcher said.

"The key question is what would happen if were not able to overcome a hurdle in a country called Germany. If we reached that point, we would be hitting a wall," he said.

So far, protest parties on the political fringes have gained little traction in Germany despite public hostility to bailouts, largely due to the historical taboos born of the 20th century experiences with Nazism and Communism.

There is a broad bipartisan pro-European majority in the German parliament. But Merkel faces strong pressure from junior partners in her centre-right coalition to stand firm in imposing austerity on euro zone debtors, which is likely to mount as an October 2013 general election approaches.

However, even in Germany, resistance is growing to applying strict austerity at home, as next month's key regional election in the giant state of North Rhine-Westphalia is likely to show.

Political risk analysts following the euro zone see a longer term threat to the bloc emanating from the populist votes.

"With one in five French voters casting their support for the National Front, the first round has exposed a risk we have been flagging since 2011: reduced support for mainstream parties, leading to an opportunity for fringe parties to increase their support by adding anti-establishment, anti-Brussels rhetoric to their political brand, drawing disaffected voters from both Left and Right," said Tina Fordham, chief political analyst at Citi in London.

"This appears to be the case in the French result, as previously in the Netherlands and Finland."

She might have added Austria, where Heinz-Christian Strache's far-right Freedom Party is joint top in the polls, and Greece, where opinion surveys suggest an array of far-right and far-left parties united by their hostility to withering austerity imposed by an EU/IMF bailout programme, are poised to scoop up half of all votes in a May 6 general election.

Le Pen spelled out the mood, saying people were fed up with the "lookalike policies of left and right governments that have followed the same failed policies for 30 years".

She accused the mainstream Socialist and conservative parties of embracing globalisation, free trade, open borders, mass immigration and tolerance of Islamic fundamentalism.

Jean-Luc Melenchon, the hard leftist firebrand who captured 11 percent of the angry vote, also denounced what he called the unbridled economic liberalism of the establishment that had led to the deindustrialisation of France and the sacrifice of social rights like retirement at 60 on the alter of austerity.

France's electoral system encourages such fringe candidates with a two-round system that enables citizens to vote with their gut on the first ballot and with their head on the second.

In the end, France will again be governed by a president of the pro-European moderate right or the pro-European moderate left, but their leeway for agreeing to further steps in European integration may be smaller as a result of Sunday's vote.

(Additional reporting by Gilbert Kreijger in Amsterdam, Noah Barkin in Berlin and Michael Shields in Vienna; Writing by Paul Taylor; editing by Philippa Fletcher)

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