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The cost of populist ideas in Europe

According to the pyramid of needs developed by the American psychologist Maslow, the need for belonging is among the fundamental needs for human beings. Nationalism responds to two socio-psychological needs: the need for belonging and the need to define one’s identity. Identity might be defined positively by using what people have in common, what do they share. Nationalism itself is not positive or negative. At its most basic form, nationalism is a way to define people’s identity by looking at what they share: the same territory, language, habits, religion, values, beliefs, etc.

by Paula Garzon

Nationalism starts to have negative consequences within a society, in socio-dynamic terms, when it is used for populist purposes. Through populism, political leaders’ purpose is not anymore to lead through a vision or direction they have for their country. Populism is based on the idea to give voice to the feelings and ideas of the mass, generally fed by anger and bitterness after an economic downturn. Populism can be defined as a specific set of ideas shared at the mass level by certain constituencies and employed at the elite level by some political actors, that defend popular sovereignty at any cost (Rovira 2019). Populist ideas generally gain power and quickly spread in economic downturns or prolonged recession situations, when the resources scarcity make people feel threatened for their economic survival.

In that case, the identity is defined by “what we are not” and in a scarcity resources context, alterity is seen as the source of danger.

Populism also responds to the need for belonging and define people’s identity but, in that case, by using other means. The aim is not anymore to look at what do people have in common. The deteriorated socio-economic context, source of frustration, anger, and bitterness, makes to define people’s identity in opposition towards someone else. In that case, the identity is defined by “what we are not” and in a scarcity resources context, alterity is seen as the source of danger.

In Europe, since the European sovereign debt crisis in 2011-2012, populist discourses have been growing within many European countries (Tony Blair Institute 2017). Recession and austerity measures decided at the European level, have led, for some countries, to the conclusion that European institutions and decision-making processes are against national interests.

If we must admit that the European Union and the Euro Zone tend to limit national institutions’ action power, we tend to forget the reasons behind this decision, which has been made more than 70 years ago. In the aftermath of WWII, the second war in the same century, the head of states representing traumatized nations decided to build the “Europe of nations” which would be based on creating high interconnection and economic interdependencies between European countries, making war impossible again (Schuman Declaration 1950). The deal at that time was: giving away some national sovereignty against the certainty that there will be no war. By renouncing partially their national sovereignty on certain topics, countries were paying the price for peace. We can’t deny the success of the European Union in terms of “peace and stability”. This objective has been successfully reached as we have spent 70 years in a row without any war on Western European soil.

On the economic side of the Union, some rules have been set to create a minimum of homogeneity for countries using the same currency and particularly to avoid the well-known “free rider” phenomena. The convergence criteria are about the public deficit, levels of public debt and, more than twenty years ago, exchange rates evolution were also considered. These rules are constraints for politicians that are not allowed any more to spend public resources in the way they would like to, particularly for electoral means: an excessive increase in public expenses would have a direct impact on the public deficit or level of public debt, ceteris paribus.

The emergence and ever-increasing populist discourses in Europe in the last decade tend to use European institutions as a target, the reason behind all national troubles. The use of the scapegoating mechanism that defines European institutions going against national interest, in a politician’s discourse toolkit, is observed in every single European country. With this analysis, I, therefore, aim to understand the limits and costs of the implementation of populist ideas in the European economic context.

Greece: from emotion to rationality.

The analysis of the Greek case is an interesting example to illustrate the dilemma that some politicians face when they are elected and when they perceive that the implementation of the ideas they were defending can generate more harm than good to the country.

Greece joined the Eurozone in 2001. After the 2004 general elections, a financial audit showed that public financial numbers were disguised from even before the entrance to the EU. Greece had much higher levels of public debt and higher levels of a public deficit than it was supposed to.

The rally against Greece was visible on financial markets where interest rates on Greek governmental bonds had reached historical heights, making it almost impossible for the country to borrow money on financial markets and putting in danger the country’s solvability.

After the 2008-2009 financial crisis, Greek public financial numbers continued to deteriorate and in 2010 after a downgrade from a rating agency, a financial rally started against Greek bonds. To avoid the rally spreading to other countries like Spain or Portugal, a financial intervention was decided at the European level: European Commission, European Central Bank and International Monetary Fund (called the Troika). The rally against Greece was visible on financial markets where interest rates on Greek governmental bonds had reached historical heights, making it almost impossible for the country to borrow money on financial markets and putting in danger the country’s solvability.

From 2010 to 2012 two recovery plans were set to help Greek public finances avoid full default that could have led to a financial crisis in the whole eurozone (European Commission 2012). On the one hand, these plans asked private banks holding public Greek bonds to erase 50 % of the debt and on the other hand, at the Greek national level, asked for deep and simultaneous national structural reforms. These structural reforms, which were implemented during the following years, were very unpopular: the main objective was a sharp decrease in public expenses (pensions, civil servant’s salaries, labour reforms …) during an economic crisis period, accentuating, even more, the economic contraction cycle.

It’s in that context, after four years of economic recession and the implementation of tough structural reforms, that new elections were held in January 2015. Syriza, an extreme left political party – whose main leader was Alexis Tsipras - announced that if they were elected, they would be ready to fight, to refuse and reject all the austerity measures. Consequently, his party won the elections (Financial Times 2015).

The “No” victory was interpreted by the Greek people as the full rejection of the austerity measures, as celebrations at the Syntagma place (Athens) have shown.

After a failed round of negotiations between the Troika and the Syriza government, a few months after the elections, a referendum was organized by Tsipras to ask the Greek people if they would accept the third recovery plan proposed by the Troika. Alexis Tsipras was supporting the “Oxi” (no) as a way for him to get some additional bargaining power in what was a very unbalanced negotiation in terms of power (Humanité 2015). But this referendum happened in a European economic crisis context and led to some radical interpretations, within the country and at the European level: European leaders and locals were talking about a “Grexit” (exit of Greece from the Eurozone).

The “No” victory was interpreted by the Greek people as the full rejection of the austerity measures, as celebrations at the Syntagma place (Athens) have shown. Whereas for Tsipras, this victory was not a way to leave the Eurozone or to put an end to austerity, but only leverage to get more bargaining power at the table. The “no” led to the second round of negotiations. Here some aspects from the first round were kept (like VAT increase) and some others were largely improved: the Greek government succeeded to negotiate an 83-billion-euro plan to cover the country’s financial needs, instead of the 10-billion-euro plan proposed by European leaders before the referendum (European Council 2015).

Why did Tsipras change his positing from rejecting the austerity measures he had before the elections to finally being able to negotiate even after the referendum? Did he betray his electors?

Here are two reflections to better understand this shift. First, one of the big critics from Syriza to the previous Greek government was that they were accepting all the Troika requests without negotiating anything. For Syriza, the government was negotiating to please European leaders and not to protect national interests, particularly to protect the most disadvantaged social classes. In that sense, Syriza kept its promise and behaved differently towards the Troika by always trying to negotiate and preserve the national interest, even if their power at the bargaining table was very low. For instance, the Tsipras government succeeded to keep the solidarity bonus for the lowest pensions, which was asked to be removed from President Junker’s list of requests.

Second, the difference between a populist opposition discourse and being the head of state, lands on the responsibility you have, particularly in times of an economic crisis. While you are in the opposition, your role is to highlight all the blind spots and weaknesses of the current government. When you are head of state, your role is defined by your political orientation, in the case of Syriza, their role was to protect the interests of the greater number of citizens, particularly the most vulnerable ones. In 2015, after the 2011-2012 European debt crisis, the interests of the Greek people were tied to the national debt sustainability and solvability of the banks. A national public finances default would have led, among other things, to thousands of unpaid civil servants (estimated at 700 000 at the time). Banks defaulting would have generated a 7 billion asset loss, thousands of jobs lost (estimated at 40 000 at that time) and particularly a total loss in people’s savings. In 2015, because of the crisis and the market’s distrust towards Greek public finance numbers, international institutions were the only source of funding for Greek public finances and banks. To preserve the interests of a greater number of citizens, negotiating with the Troika was the best option. Implementing the anti-European ideas and leaving the Eurozone would have been real chaos for Greece and Europe.

It’s common to criticize politicians that hold populist discourses and particularly to criticize their unwillingness to implement their ideas. It must be stressed that when these kinds of politicians have strong electorate support and do not want to consider basic economic principles, the cost of the implementation of their populist ideas can be very high. Brexit is the best example that illustrates this kind of situation.

The United Kingdom: when populist ideas are implemented

The United Kingdom has always had an ambivalent relationship with the European Union, expressed in French as a “Je t’aime. Moi non plus” relationship. The UK joined the European Union only in 1973 and two years later, polls show that one-third of the population already wanted to leave (The Conversation 2016).

To get re-elected in 2013 David Cameron promised, during his campaign, to hold an “in-out” referendum to get the support of anti-EU voters. Cameron won the election in 2015 and one year later he organized the referendum, backing the remaining campaign. If we take the two main arguments advocated by “leave” supporters, we can see that the intertwined relationship between the UK and the EU was more complex and complete than anticipated.

1- Financial contribution to the EU

First, the focus was on the financial contribution to the EU (UK Office for National Statistics 2019). This was one of the strongest arguments coming from politicians, such as Nigel Farage, mixing economic and false sovereignty arguments. The objective was to say that the financial contribution to the EU (20 billion pounds in 2018) could be better used at the national level to improve the national health system, for instance. The idea might seem clever at first sight, but some elements need to be considered for this reflection. First, as Nigel Farage recognized later during the campaign, it was impossible to be sure that the resources taken from the EU budget could be reallocated to the national health system. Second, as a graph from the office for national statistics shows, the financial exchange flows were more complex than the amount of “20-billion-pound contribution”:

Over five years the UK contributed around 18 billion pounds to the EU. However, from that amount, a deduction was applied (Abatement negotiated by M. Thatcher in 1984) and part of the money was redirected back to the English economy through public and private sector credits. Financial relationships between the UK and EU were more complex than simply saying that the country was a net contributor or net beneficiary.

Finally, the last argument that was not mentioned by the “Leave campaign” was the cost of leaving the EU, also called “the divorce bill”, which represented the amount the UK had to pay in settlement of its outstanding liabilities when leaving the EU (UK The Institute for Government). Since the referendum, the UK has already paid 40 billion pounds to the EU, representing the payment for a share of spending that the EU committed to while the UK was a member. According to the economic outlook report by Office for Budget Responsibility, the “divorce bill” will represent 37-billion-pounds, payments extending until 2064 representing EU pension staff liabilities.

The general perception was that this situation made it easy for European migrants coming from Spain and Italy (countries hardly hit by the crisis) to enter the UK and then decide to stay illegally for work reasons.

2- Migration

The British have always been reluctant to the idea of the free movement of people and have never wanted to be fully part of the Schengen area. Despite this decision, there has always been an increase in popular widespread satisfaction.

The strong increase of the migration flow through the EU arriving in the UK after the European debt crisis in 2012 has fed nationalist movements (UK The Migration Observatory 2019). The UK was not part of the Schengen area, but still gave the possibility for EU members to enter their territory without any visa request for a stay shorter than 90 days. The general perception was that this situation made it easy for European migrants coming from Spain and Italy (countries hardly hit by the crisis) to enter the UK and then decide to stay illegally for work reasons. But migration is dynamic and not static. If we look carefully at the numbers of the immigration observatory, the top three countries by nationality among migrants in the UK in 2019 are: Poland (14,5%), Romania (7,2%), India (5,9%). These migrants needed to validate the immigration process set by the UK itself to enter (The Migration Observatory 2019).

Politicians during the referendum campaign promised to solve the immigration problem by reducing the visa attribution to give back employment to British people. Keeping this promise coupled with the new custom restrictions and controls since the Brexit, have led to a general disorder in the UK economy: a general shortage of products in the supermarkets. The most surprising situation is the shortage in petrol, because of the lack of truck drivers, part of them being immigrants that have experienced suspension of their work permit (Office for National Statistics 2021). Industry bodies estimate that there is a shortage of about 100 000 good drivers (BBC 2021).

We are only at the beginning of the implementation of the separation agreement between the United Kingdom and the European Union. Over the next few years, we can anticipate the closure of activities on British soil, the disinvestment of companies that had chosen the country as a gateway to a continental market, and difficulties in the research and innovation sectors, which are increasingly internationalised. The outcome of the Brexit after a few years will probably be negative in terms of growth, employment, and economic stability. The attractiveness of the economy generated by the currency depreciation won’t be enough to compensate for the resulting negative consequences of the vote.

Populist ideas are the reflection of mass opinion, implemented by politicians at a macro level, without considering or anticipating the level of global consequences. These two examples helped to illustrate the two opposite experiences of populist leaders. In the case of Greece, populist ideas helped to succeed at the general election but were not implemented (the main idea was to stop negotiating and leave the eurozone). Whereas in the case of the UK we can see and observe all the direct negative consequences of the implementation of populist ideas: when a country is governed by emotions of the masses and not by the strategic thinking of respecting fundamental economic mechanisms, this can only generate chaos and disorder.

Paula Garzon is a professional negotiator. Trained and currently working with former French special forces negotiators, she also obtained the cross-cultural and international negotiation executive certificate from IRENE (Essec Negotiation Institute). As binational, franco-Colombian, and former economist, international and cross-cultural negotiations are at the heart of her expertise.


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