The EU parliamentary elections

One headline is this:

The far right anti-EU National Front was forecast to win a European Parliament election in France on Sunday, topping a nationwide ballot for the first time in a stunning advance for opponents of European integration.

I’ve long maintained two points:

1. The eurozone crisis, in purely economic terms, was always salvageable.  Monetary policy hasn’t much been used actively, the latent OMT semi-commitment more or less worked, and debt to gdp levels for the eurozone as a whole have never been worse than those of the United States, to cite a few simple facts.

2. Saving the eurozone requires a lot of political coordination, and a lot of intra-zone wealth redistribution, in a manner which I thought was unlikely to be initiated or maintained.

Since I’ve never been convinced that #2 is workable, I’ve not yet had a “I guess I’m wrong about the implosion of the eurozone” moment.  You may recall my earlier prediction: “”Enter democracy, stage right” is the next act in the play.”


like TARP, the eurozone bailouts were a success, even though no one liked them.

Agree. I'm a hard money Austrian libertarian goldbug lunatic. But the whole point of fiat currency is to have the ability to drastically increase the elasticity of money during financial panics, credit crunches and speculative runs. On net I don't think that benefit outweighs the cost of inflation's persistent wealth tax or the deep and and often absurd regulation necessitated by tying banks to the government's credit.

But if there's going to be massive political opposition every time the power of the print press proves useful, than it's like you're paying all the costs of fiat money but never getting the benefit.

I'm a hard Keynesian sane person, and I fully agree with you.

Thought experiment: what if the bailouts did not happen? What do the Keynesian models say? About 3-5% more unemployment and 15-20% or so less short-term output, from what I've seen. Keep in mind further that credit default swap futures, that track uncertainty, did not peak until Feb. 2009, well *after* the bailouts (and not coincidentally the time of the all-time lows in the stock market). So the bailouts were short-term "good" but hardly necessary for recovery or to stem panic. Without any bailout in 2008 you would have more short term pain, arguably (this is a point of contention) more long term gain, and life goes on.

Such intelligent analysis--you should teach economics at the University of Manila.

@Doug, but TARP and the Eurozone bailouts happened. So, isn't the massive political opposition acting as a check on its use rather than preventing its use? Even if the ability to bail things out is good, the ability to do it too easily would clearly be bad.

I’m a hard money Austrian libertarian goldbug lunatic.

You said that last word, not anyone else.

This election was not about economics, the debt crisis was not the root of the problem.
But the crisis and the way "our" politicians acted showed clearly the fundamental faults this union has. I do not like the Front National, but I hail their success as a first step to rectify what has gone wrong and to rebuild this union in a way that is free, democratic and anti-totalitarian.
This should be a wake-up call for the elites who though they could run Europe like it was their fiefdom or the next elections will be even more anti-EU.

I'm an outsider, but is what is happening in France really "not about economics"? Just a couple of years ago the Socialists took power, and the failure of their economic policies seems to be the primary story.

Hi, Dan

No, I would say that it's not that. The socialists came in, promising to right the wrongs affecting French society. They're very numerous but, as Das suggests, a goodly chunk of them comes from the minimalistic/free tradish mishmash that is the EU. The Eurozone is not coherent. To re-quote Pr Cowen, "[s]aving the eurozone requires a lot of political coordination, and a lot of intra-zone wealth redistribution, in a manner which I thought was unlikely to be initiated or maintained".

You got great imbalances between countries and between the rich and the poor. But no single country can address the imbalance between its rich and poor without serious risks of tax arbitrage from within the Union.

So the socialists failed to renegotiate the various European treaties they promised they would renegotiate and, in general, people are realising that the EU, as it is, is a paralyzing mess no-one knows how to reform.

So, yeah, due to the failure of the EU institutions to deliver on its goal of shared prosperity, people are turning against it. It's not exactly surprising.

So, it's about "intra-zone wealth redistribution", "imbalance and poor", and " deliver on its goal of shared prosperity"? That sounds like economics to me, and the economic downturn is what is driving these issues to the fore.

The "far right" part really means "ultra-leftist member of the media disagrees with the party/program/politics".

That same "oh, I am an impartial member of the media" will in the next sentence write something about the Greek political party Syriza without the tag "far left" to describe the party/program/politics.

The old boss of the FN, Le Pen pere, this week said the Ebola virus could solve France's immigration problem. So why take five minutes out of your day to sympathise online with a would-be génocidaire?

"That same 'oh, I am an impartial member of the media' will in the next sentence write something about the Greek political party Syriza without the tag “far left” to describe the party/program/politics."

SYRIZA is an acronym for "Coalition of the Radical Left." It would be a bit odd for a paper to write something like "the far-left 'coalition of the radical left' party"

I get your point but let's not be naive. The acronym could mean "caring grannies in fuzzy slippers" and the press would refuse to characterize them as "far" anything. There's a degree of sympathy for the thuggish SYRIZA that does not exist for even the mildest parties outside the socialist orbit.

It is important to never lose sight of the religious character of modern politics. Millian (above) would embrace and thank a member of SYRIZA who was about to shove him in the oven. Yet, a member of FN who says things that may hurt his feelings is the devil.

Diddums. Are you upset because I noted that your beloved far-right candidate's dad wanted millions to die from an African virus?

More uptalk. Hipster pansies are the most odious byproduct of gentrification. It's why I live in the ghetto. At least the men still wear pants.

The ECB is asphixiating Europe. Sad to see a peevish fixation on inflation become central banking. When Volcker was Volcker he declared victory when inflation in the 4-5 percent range. Now the Fed and the ECB have inflation at 1 percent, and constantly blubber about inflation. You know, real growth is an abstraction but a nominal price index is sacred...


Imminent implosion:

note also the FN's sentiments on immigration. The Cowenist position is getting hammered in France

There is no conspiracy to suppresses Piketty's book, we;re just pointing out that Pickets may have picked at his data to get the results he wanted, instead of the actual data.

It looks like UKIP may take a third of the vote in Britain. I'm eatin' it up with a spoon.

I’ve not yet had a “I guess I’m wrong about the implosion of the eurozone” moment

Do you ever have those moments? Your predictions of the impending doom and Euro exit for Greece from two years ago - remember them?

Tyler - You deserve credit for #1 and #2. However, we need a timeline on "enter democracy, stage right".

If the next act in the play is 50 years hence, that's a lot different than next year.

When does democracy actually enter?

Major fundamental problems in countries like Greece and Italy have not actually been solved. They are out of the news because no big newsworthy events are happening, not because things are actually fixed. Neither side in this debate has been proven right yet.

And if further action is needed, it is looking a lot less likely given the shift in the political situation.

I'm a Tyler fan, but I've gotta agree, this is pretty weak sauce. If democracy will prevent the required redistribution and/or internal devaluation, then someone has to leave the euro zone. If this is Tyler's prediction, he should own it. If this is not Tyler's prediction, he should explain what his perdition is. "Something will happen. The will of Euorpean peoples will play a role." does not count.

Tyler's claim is that political rather than economic constraints will dictate whether the crisis is solvable. This seems pretty clear, and a useful corrective to lots of commentary that only looks at the economics.

Nobody actually knows what is going to happen. Why do you want highly specific predictions about that?

@dan1111- actually everybody with money in Greece knows what will happen, and the smart ones have voted with their money and in some cases their feet. Prediction markets at work.

Greece is irrelevant. Italy's fate, otoh, will decide the fate of the euro 'experiment'.

Yeah, it seems like the critics here simply don't understand the material. What must be done to solve the EU's troubles long term are never going to pass muster with voters. The solution to that is to get around the voters, which has been the habit. The EU would not exist if it had been left to the voters. This election will encourage the elites to bypass the voters going forward, which is probably what the voters really want anyway. Continentals have never been fans of self-government.

I agree that this is weak. The current condition of Europe is very, very far from what Tyler was talking about during the Eurozone crisis. Even if he was technically never wrong (which I kinda doubt, but I'm not super interested in going line by line looking for a gotcha), the overall tone and arguments just wasn't the way things turned out (along with pretty much every Europe link being pessimistic). Had Tyler been told in the summer of 2011 what the summer of 2014 would look like, I expect his writing and linking would have been dramatically different.

The much better Douthat column about errors he made in 2013 I think captures what I'm getting at (although in this case, Tyler radiated pessimism):
"Looking ahead to another round of budget battles, I suggested Americans should be grateful that “the speaker who prevented dysfunction from producing disaster last time is around to try again.”
Technically that column didn’t make any predictions, but it radiated an optimism that turned out to be unwarranted."

I continue to think that Tyler is one of the most interesting, thoughtful thinkers out there. But I've been reading for nearly a decade and this post's unwillingness to acknowledge or grapple with a pretty clear failure of forecasting is the first one that I've really disliked.

"Enter democracy, stage right"

I don't speak Cowenese. Can someone explain to me WTF Tyler means by this?

There are a few ways this could play out. Imagine Portugal and or Spain, Italy, Greece Ireland or any of the countries that are having balance of payment issues or are overextended with debt electing an anti EU pro screw the foreign bankers administration, all the while Germany, Finland and other of the more successful countries electing an administration that is anti ECB and refuse to bail out or support any measure that involves transfer of resources to those other countries.

These have all been an undercurrent already, manifested in the German mistrust of the ECB and Finland setting strict terms on extending debt.

There has been something akin to Mutually Assured Destruction in how countries have reacted. No one would escape unscathed, all the national banks are deeply intertwined and extremely fragile, so the fear of catastrophe has focused the mind. But as the stagnation and in some places deep depression goes on, the more radical voices start making sense considering how messed up things are.

As well, the EU has a solid anti democratic core. These organizations can become extraordinarily obtuse in misreading the basis of their power.

Great writeup--thanks!

'Enter democracy, stage right' is an oblique way of predicting more right wing politicians being elected in light of the euro crisis.

Three points against the collapse of the Eurozone:

1. The EU has in the past done many things that required "a lot of political coordination, and a lot of intra-zone wealth redistribution": instituting the free movement of labour; instituting the free movement of capital; putting in place trans-European taxation and spending mechanisms; putting in place trans-European political institutions; and putting in place a trans-European judicial system. I have yet to see an argument put forward explaining why all of the above obstacles were surmountable, but the putting in place of a European banking federation is not.

2. What we are seeing here is people voting at a European level (across the continent), by means of a European institution (the European Parliament), on a European issue (the European economic malaise). The fact that even "anti-EU" parties rely on the use of European institutions to make themselves felt says volumes about the strength and legitimacy of those institutions.

3. The way forward for European monetary union is unclear in its details but pretty clear in its overall direction: some sort of trans-European banking federation will have to be set up. The way back to a pre-Euro era is almost impossible to see and, by design, meant to be pretty much impossible to carry out without total, continent-wide economic collapse. If and when push comes to shove, the vast majority of Europeans will take the former over the later; even the Germans.

I am as pro-european as they come and I fully disagree.

1- No common debt, no serious overall, federal budget. Yes, the farming stuff matters but it's not enough.

2- And, despite this malaise, you don't have enough coordination across the various lefts to point out that Labour is getting screwed everywhere in Europe and thus it is only by fixing the rich/poor inequality issue at the European level that you will eventually/at the same time, be able to re-assess the balance between countries. Here, it's just a bunch of nations electing all their own anti-EU guys. FN didn't coordinate with UKIP. They just happen to agree on "fuck the EU".

3- We shall see. So far, lots of EU elites seem willing to sail close to the wind and hope that people will bear a muddle through economy forever and ever. Maybe they're right. But it might also result in the FN, UKIP etc assuming majority control in the EU Parliement. I expect the EU to start unraveling if that did happen...

1. I think you're kind of begging the question here. What is it about common debt that makes it the straw that breaks the camel's back when, for example, accepting that EU law supervenes on national law was not?

2. Most elections involve at least as much voting against someone as they do voting for someone. That's fine, it's the system working. There are probably more people in the UK who vote against Labour or against the Tories than there are who vote for either of them. I would say that these newly powerful parties agree on "fuck the EU's current policy consensus" rather than "fuck the EU" per se.

3. If forced into the position of having actual power these parties would do one of two things: integrate themselves into the existing political structure and become that which they set out to destroy or smoke, fume, fail to do anything productive and get politically annihilated at the next election.

Policy measures for UKIP: set up a tariff commission to monitor EU rates and make authoritative adjustments in British rates; re-compose the country's immigration law, banking law, insurance law, and securities law; and tear up every bloody EU treaty there is. Norway and Switzerland function satisfactorily without being EU members. No need to fume or ingratiate.

Many American Republican politicians owe their positions to their riling against the excesses of the Federal Government and their pay-checks to those excesses themselves. I doubt that UKIP MEPs will be any more successful in shrinking EU government than the Tea Party have been at shrinking US federal government.

Britain has a parliamentary system, the upper house of the legislature can delay legislation but not block it, the head of state has not vetoed an act of parliament since 1702, the ministries are in the hands of the parliamentary majority, and the appellate judiciary can be sorted by parliament if they attempt to get into the policy-making business. The institutional set-ups are quite dissimilar. The threat to democracy is in Brussels. Eliminating the authority of Brussels is the whole point.

The way back to a pre-Euro era is almost impossible to see and, by design, meant to be pretty much impossible to carry out without total, continent-wide economic collapse.

Barry Eichengreen said that, making much of the preparation time necessary to introduce a new currency in physical format. Sometime later an official in Slovakia recalled that employees of the central bank had spent a weekend in 1993 working with rubber stamps after which they had their new currency. Each Euro country has signature coinage. The paper currency is identical, but the locally printed currency has a signature letter code on the rear. Sort your vault cash and post the foreign-origin stuff to the central bank in return for reserves in the new local currency, and get to work with a rubber stamp.

Have a bank holiday, institute exchange controls where you auction tranches of foreign currency each month, and get to work with your rubber stamps. It's not as if no one ever abandoned a currency peg before.

The problem's not the physical money supply, it's the contracts nominated in euros. If, for example, Greece introduces a new drachma everyone dealing in or with the country will want to pay in drachmas and be paid in euros, creating years of legal chaos and economic paralysis. Amongst the losers would be Germans who found themselves getting paid in drachmas and having to pay their own debts in Deutschmarks, which is why I think they'll probably pay up to avoid a Eurozone break-up.

No legal chaos. The United States Congress extinguished the enforcement of gold clauses in contracts in 1933 without legal chaos. That will do for intramural dealings. Extant debts would still be denominated in foreign currency. None of this is novel.

"external debts"

I don't know whether I hope you're right or hope you're wrong.

Scores of countries have devalued their currency in the last four decades, so I cannot figure why you fancy the presence of debts denominated in foreign currency renders this impossible.

The fact that even “anti-EU” parties rely on the use of European institutions to make themselves felt says volumes about the strength and legitimacy of those institutions.

No, it says that's what's there.

I would say that Europe has tended to change when the political costs were low (as with all systems) or when the costs of inaction seemed too high. This was true of the 1980s when improvements in the capital markets virtually "forced" Europe to open up its markets or fall behind drastically. It could've fought against this trend, but we did see the experience in France of Mitterand trying to force more socialist policies, failing, and then reversing course to become (by French standards) a supporter of financial deregulation. Of course "anything" can happen, but it's hard to predict political behavior when discontent is high, there are fewer goodies to give around (no more bread and circuses), and existing decisions seem opaque and undemocratic.

Tyler, you have to put those two points in order:

Because the actions taken thus far did work (point 1), more coordination (point 2) is not needed. If any interpretation can be made from the election's result it's that Europeans are ready for more coordination (if needed). Even in Britain: UKIP's 30% basically mean a 70% vote in favour of the status quo (at least).

I'm not a EU-fan, but this is hardly anything troubling for the Eurocracy.

More coordination almost certainly is going to be needed. Fundamental problems h1)aven't been solved in Greece, Italy, Portugal, Spain, and other places.

And it was very difficult to get this coordination under the previous status quo. With anti-austerity movements in the countries that need help, a significant anti-EU contingent in European parliament, and mainstream parties moving to the right, it's going to be practically impossible to get further coordination.

Seeing the UK vote as a 70% vote for the status quo is absurd. Not everyone who is skeptical about Europe was willing to vote for UKIP, for various reasons. The fact that 30% voted for a party that is widely seen as a dangerous fringe part is a huge vote against the status quo.

It's 30% in a vote that should have attracted foremost all the EU sceptics like me. It hasn't obviously.

Some people are EU skeptics but think UKIP is racist, disagree with its positions on social issues, etc.

So they voted for the tories which is basically the status quo. If UKIP is racist, than it's 30% should have even less to do with european policy but with british domestic one.

Except for Greece, none of the PIIGS countries voted against the status quo. France's Front National result is as a "suprise" as hardly anything out of france lately. FN rakes in usually around 15-20%. What's different for the French in the EU vote is that there is no second round. FN's constant high percantage-numbers in the last votes were all concealed by second round votings where smaller parties are excluded and people choose to vote the lesser evil. There is no easier second round for a French presidential candidate than to run against an FN contestant (2002: Chirac got 80%++)

Look what happened to the Mulroney Conservatives in Canada in 1993, or the British Liberal Party in 1924. Phase changes of this sort in party politics can be very rapid.

Labour wins the election with 35%, Conservatives would be obliterated if UKIP gets numbers like this in a general. This is not status quo.

Like Cowen, I predict that the EU will eventually implode. Heat death of the universe will make my prediction come true, eventually, though I'm not providing a timeframe or anything like it.

"They want to be protected from globalization and take back the reins of their destiny." They miss their global influence. Too sad influence comes from money not the francophonie =(

But one reason for this is that no one's really able to explain to the European layman how the euro can be made to work.

The right-leaning side of media editorializers says Europe needs to strictly enforce its 3%/60% deficit/debt rules and rule out future bailouts. Which is so far from happening, no one believes even the people saying it are trying at all.

The left-leaning side of media editorializers says Europe needs a system of automatic fiscal transfers to crisis countries, which they liken to how things work in the US. But it's obvious that would only stir up more resentment of the EU and euro and tear Europe apart, not hold it together..

The US is held together by a big federal budget a federal safety net that can move funds from stronger to weaker areas without that being much noticed. We hate federal-to-state bailouts and would never dream of state-to-state bailouts. But almost nobody in Europe, left or right, is ready to go there.

So we have this protest vote. This is far from the end of the euro. The EU parliament is so notoriously toothless that voting is light and those who do vote tend to view it at as a safe place to vent their anger at the mainstream without having to give radicals real power.

A vote that has no consequences as you say should had given the radical parties even more votes, or not? That didn't happen. Germany's anti-euro party got 8%, the parties in favor of euro-bonds and piig-bailouts even got more % than in the last German Federal Election. If that is the message coming from the populace of Europe's biggest stakeholder, I don't see any of this "implosion"/"anti-EU-Revolution"-doomsday-Nostalgia coming to life.

The election was not about eurobonds. The media gave the impression that the crisis was basically over. The parties talked out of both sides of their mouths.

Martin Schulz said on eurobonds: ""Ich philosophiere schon gar nicht in Wahlkampfzeiten über Themen, die sich erledigt haben. Es gibt für Eurobonds weder eine Mehrheit noch sind die Bedingungen für ihre Einführung erfüllt.""

Translation: "I don't philosophize about issues that are no longer relevant, especially during campaign times. There is neither a majority in favor of eurobonds and the preconditions for their introduction are not fulfilled"

The message of establishment media and politics towards the German public was in short: "The crisis is over, nothing to see here. Don't worry, you don't have to pay. Don't listen to these tinfoil hatters from the AFD."

The social democrats actually pulled the nationalism card. One of their campaign slogans was: "Only if you vote for Martin Schulz, can a German become president of the EU-commission"

Just to point out that start-up parties in Germany (or anywhere else) do not sweep the board immediately. A performance of that dimension less than two years after the foundation of said party is as well as any start ups have done in the years since 1949.

What Start up Parties are you Talking about? Except for Germany's afd?Front national (1972), Chrysi Avgi (1993), ukip (1993), Perussuomalaiset (1995). The Youngest of importance may be the dutch Partij voor de Vrijheid (2002) and all of These had their hay Moments at earlier Elections. Why does it have to be NSDAP all over again?

The start ups would be the minority starboard parties in Germany after 1945, the Green lists in Germany after 1976, die Repulikaner in Germany after 1986, the post-communist lists after 1990 (in the West Gberman context, not the East German context), and the East German parties you found in 1990 which were neither an extension of West German parties nor derived from the ruling party. Most of these faded within a few years. The Green lists and the post-communist parties have had some durability. You could argue that the Christian-Democratic Union in 1948 was a start up and not a refoundation of Weimar or Hohenzollern-era parties (as was the Social Democratic Party without qualification and the Free Democratic Party with qualification); it actually did sweep the board.

The National Front has been building its base of support gradually over more than 40 years and it took a dozen years for it to perform as well as Alternative for Germany has right out of the box.

Probably democracy is exiting stage left.

Already happened in this country. If they can revive it in Britain, there may be hope for us.

It's fascinating how all over the world we are seeing a reasonable response to the failure of Globalist ruling parties in 2008 by a turn to Patriotic parties ... except in America where the Globalist bipartisan consensus is so suffocating in the media that patriots have to dig in just to prevent another amnesty.

The 'globalist bipartisan consensus' is not suffocating. It's just that the defaults in the system favor bureaucratic lassitude and Dickensian legal controversies. A determined majority needs to have a majority in the lower house, a super majority in the upper house, and the presidency; It also has to intimidate the judiciary as well. It's our bad institutions, not the elite consensus, that is the main problem.

That parties like UKIP and Marine Le Pen's did so well in this round of elections, despite sailing into a strong media headwind, leads me to believe that they have a chance to replace the pro-EU politicians.

Of course, the media and political opponents will constantly call them racist, which will cause a fair number of idiots to oppose them even when they might agree with their policies.

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