Mi­nor­ity EU govts strug­gle

Kuwait Times - - ANALYSIS -

Europe’s growing num­ber of shaky mi­nor­ity and coali­tion gov­ern­ments mostly man­aged to mud­dle through 2016 but their lack of po­lit­i­cal strength sug­gests they will not be pur­su­ing many ma­jor pol­icy ini­tia­tives in 2017. Op­po­si­tion threats to flag­ship la­bor re­forms in Spain and dif­fi­cul­ties pass­ing new res­i­den­tial rental laws in Ire­land last week ex­posed the fragility of in­cum­bents who re­turned to power this year but in a much weak­ened form.

Bul­garia is braced for months of uncer­tainty and threats to nec­es­sary eco­nomic re­forms by the fall of its cen­ter-right mi­nor­ity gov­ern­ment, while weeks of pol­icy bat­tles al­most top­pled mi­nor­ity ad­min­is­tra­tions in Nor­way and Den­mark. Ahead of 2017’s crowded elec­tion cal­en­dar, th­ese strug­gles sug­gest that even if the cen­tre-ground holds in the Nether­lands, France, Ger­many and Italy, some vic­tors may have to get used to rule by com­pro­mise and the risks that go with that.

“What elec­torates want is change, they’re just not sure what change and, if you’re a mi­nor­ity gov­ern­ment, it’s very dif­fi­cult to de­liver that while also main­tain­ing some form of cred­i­ble eco­nomic pol­icy,” said Com­merzbank econ­o­mist Peter Dixon. “Roll­back (of pol­icy) is a risk. You might end up in a sit­u­a­tion where gov­ern­ments are un­able or un­will­ing to push for­ward on the kinds of pol­icy re­sponse that may be needed and if you have weak gov­ern­ments at a time of pol­icy prob­lems, that then leads to ad­di­tional po­lit­i­cal risk.”

With es­ti­mates of planned bor­row­ing next year in­di­cat­ing that euro zone gov­ern­ments have lit­tle in­ten­tion of ramp­ing up fis­cal stim­u­lus, that sug­gests that mone­tary pol­icy in the shape of the ECB’s as­set-buy­ing pro­gram will con­tinue to be the main stim­u­lus to the re­gion’s economies. In Ire­land, Prime Min­is­ter Enda Kenny’s mi­nor­ity gov­ern­ment re­lies on the co­op­er­a­tion of the main op­po­si­tion party Fianna Fail to pass leg­is­la­tion, an ar­range­ment that leaves it with “all of the re­spon­si­bil­ity, but none of the power”, ac­cord­ing to In­vestec Ire­land Chief Econ­o­mist Philip O’Sul­li­van.

O’Sul­li­van made the re­marks af­ter Kenny’s Fine Gael had to bat­tle to se­cure their ri­vals’ back­ing for new res­i­den­tial rent con­trols, a key pol­icy ini­tia­tive. Kenny has also so far been un­able to stop a pro­posed law, tabled by op­po­si­tion Fianna Fail, to hand the cen­tral bank pow­ers it does not want to set mort­gage rates.

‘No Big Bang’

They did eas­ily agree their first bud­get in Oc­to­ber and the pact has lasted longer than O’Sul­li­van and oth­ers pre­dicted, the kind of makeshift sta­bil­ity Prime Min­is­ter Mar­i­ano Ra­joy is hop­ing for as he bids to avoid leg­isla­tive stand­still in Spain. In just six weeks since his new gov­ern­ment was sworn in, op­po­si­tion pro­ceed­ings have been ini­ti­ated to scrap prom­i­nent ed­u­ca­tion and civil rights laws, with the labour re­forms cred­ited for help­ing Spain re­bound from its worst down­turn in al­most a cen­tury next in the fir­ing line. — Reuters

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