Wednesday’s election results in the Netherlands were generally interpreted as a victory for pro-European forces at the expense of nationalist and Socialist fringe parties. But perhaps the more important event of the day was the German constitutional court’s ruling on the European Stability Mechanism, the bloc’s permanent bailout fund. Its implementation was not blocked by the justices. Chancellor Angela Merkel heralded their decision as a “strong signal” to Europe and the world. “Germany is accepting its responsibility as the largest economy and reliable partner in Europe,” she told parliament.
In both countries, Euroskepticism is rising nevertheless. This public sentiment is often overlooked or underestimated in the English-language press which may explain the Anglo-American exasperation with the eurozone’s two strongest economies’ apparent unwillingness to save the single currency from collapse.
The two most Euroskeptic parties in the Netherlands did lose in Wednesday’s election but for the Financial Times to declare the outcome “a decisive and surprising rebuke for populist Euroskeptic politics” is a troubling misreading of Dutch popular opinion. The leftist British newspaper The Guardian even predicted that the Netherlands would tilt “the balance of power in the eurozone toward President François Hollande’s Socialists in France and away from Chancellor Angela Merkel in Berlin.” That is highly unlikely.
The ruling Dutch liberal party has become more Euroskeptic in recent years, tapping into taxpayers’ frustration at demands for belt tightening at home while having to stump up billions of euros to rescue what they see as profligate budget sinners in the periphery of the currency union. The party’s leader and prime minister Mark Rutte, before the election, insisted that he would not back a third bailout for Greece, a position that was condemned by Labor but echoed the very next day by German finance minister Wolfgang Schäuble who has been highly critical of Greece’s failure to comply with the terms of its two rescue packages for years.
Merkel and Rutte may insist that they are willing to do “everything” to save the euro but that no longer means keeping the eurozone together. Rutte said as early as February that the zone could “handle” a country leaving because the risk of “contagion” has been reduced. Dutch and German public opinion has turned overwhelmingly against further bailouts for high debt nations in the periphery.
Another reason for the Dutch and Germans’ apprehension is the European Central Bank’s increasingly expansionist monetary policy. When central bank president Mario Draghi announced last week that he was willing to finance the deficit spending of countries like Italy and Spain — although he did not mention them by name — by buying their bonds, he was widely condemned in the two northern states.
The conservative Die Welt and populist Bild newspapers have long been critical of what they perceive as the central bank’s subsidization of spendthrift Southern European nations under the Italian bank president Draghi. The former declared his latest policy move tantamount to “the death of the Bundesbank” because Draghi had broken “with the principles of German monetary policy.”
For Germany, the nightmare begins. There it was: the word that everyone was waiting for: unlimited.
Bild argued that Draghi had written a “blank cheque for debt states.” Even the liberal Süddeutsche Zeitung was alarmed, arguing that the central bank had crossed two red lines.
Saving the euro at all costs can be an economic disaster. That is the red line that must not be crossed. The other limit is the law: in a community governed by law, the ends cannot justify the means. A European community that is based on the breach of contracts will always be based on fragile foundations.
In the Netherlands, too, there was concern. The conservative weekly Elsevier spoke of “Draghi’s coup” and warned in its editorial, “misconduct is no longer punished but covered up and the price is paid by those who don’t borrow recklessly.” It predicted the end of the eurozone in its present state if Dutch and German concerns were ignored.
The Dutch parliamentary elections were not about this issue. But that the patience of German voters is wearing thin is clear. The only question is when the limit is reached in Germany.
Jens Weidmann, the president of the German Bundesbank who was the only member of the European Central Bank’s governing council to vote against the latest bond purchase operation, warned in Der Spiegel last month that “central bank financing can become addictive like a drug.” Countries like Italy and Spain will be less likely to reduce spending and liberalize their economies if market pressure is effectively neutralized through the printing presses in Frankfurt.
Weidmann added that the central bank buying bonds is “too close to state financing via the money press.” Economist Jürgen Stark, who resigned from the ECB’s executive board in dismay last year, wrote in the Handelsblatt newspaper that, “There is a danger of high inflation — not today, not tomorrow but in the medium to long term.” He added that the central bank has “repeatedly crossed red lines” and that plans to buy government bonds amounts to “illegaly financing states.”
The same newspaper observed last June that “the balance of power in Europe has changed” from north to south. An editorial in the conservative Frankfurter Allgemeine Zeitung warned that “the conditions for EU aid are increasingly blurred.”
Chancellor Merkel, though committed to saving the euro, has to take public opinion into account ahead of next year’s parliamentary elections. Polls suggest that, as in the Netherlands, the mainstream left- and right-wing parties in Germany will have to form the next government. Even if the social democrats in both countries are more pro-European than their conservative and liberal counterparts, voters are simply not willing to salvage the single currency at all costs. It is not something only their politicians should remember but commentators in other countries, who are urging the Germans to do more to prop up the euro, especially.