EURO-POPULISM
LONDON—For months, the outlook for the eurozone economy has brightened thanks to a series of electoral defeats for political parties that were critical of the euro currency. Now, votes in Germany and Austria and uncertainty over the Spanish region of Catalonia are reviving concerns about the unity of the bloc.
In Germany, the anti-immigration and anti-euro Alternative for Germany received almost 13 percent of September’s national vote, putting it in parliament for the first time. Though the center-right Christian Democrats came out on top, the authority of Chancellor Angela Merkel was weakened by AfD’s relative success.
And in Sunday’s Austrian election, the right-wing Freedom Party come second with around 27 percent of the vote — enough to possibly become part of a government.
Should the party, which has sought to downplay the country’s Nazi past, become part of the government, it could hinder efforts to further integrate the economies of the 19 countries that use the euro. Such measures, advocated for particularly by France’s new president, Emmanuel Macron, are considered important to avoid new financial crises, stabilize the banks and sustain growth.
“Even though Austria is highly integrated and depends on the eurozone’s structure and openness, a new Austrian government will make the eurozone’s life harder, trying to push through self-interests,” ING economist Inga Fechner said.
The euro has edged lower in recent weeks as a result despite data showing that the eurozone economy is enjoying one of its strongest periods of growth since the global financial crisis exploded a decade ago. On Monday, it was down 0.2 percent at $1.1795, having been above $1.20 at the end of August for the first time in two years.
Also of potential concern to the eurozone is the uncertainty surrounding Catalonia following its disputed independence referendum earlier this month. On Monday, there was still a lack of clarity as to whether the region’s leader, Carles Puigdemont, has declared independence following the vote that Madrid has deemed illegal.
The Spanish government of Prime Minister Mariano Rajoy has repeatedly said it’s not willing to negotiate with Puigdemont if independence is on the table, or accept any form of international mediation. The government has threatened to activate Article 155 of Spain’s Constitution, which could see Madrid take temporary control of some parts of Catalonia’s self-government.
While the Catalan movement is not explicitly against the euro, unlike the German and Austrian right-wing parties, its success would shake the currency union by breaking up its fourth largest economy.