Why Europe’s socialists fear austerity will only help the far right

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Good morning. The European Commission descends upon Davos en masse today, with at least six commissioners in town for the penultimate day of the World Economic Forum. That includes president Ursula von der Leyen, who’s back for a second stint this week, after visiting Strasbourg and Italy in the past 24 hours.

Today, our parliament correspondent hears from the Socialist leader in the chamber that austerity policies will only help fuel the far right, while our economy correspondent reports on a pitch for the EU to take a tougher line on economic security.

Austerity trap

EU member states risk boosting support for the far right in this summer’s European elections with austerity measures, the Socialist leader in the European parliament tells Andy Bounds.

Context: Polls predict a surge in seats for rightwing groups in the June ballot, mainly because of fears over immigration, the rising cost of living and insecure employment. 

Iratxe García Pérez, head of the current parliament’s second-biggest group, says financial help for those affected is vital.

The centre-left leader told the FT the far right fed off inequality and pessimism and EU capitals needed to come up with more money to reduce those factors.

“The far right has more space when there are more inequalities,” she said. 

The Socialist manifesto would be “to defend the social dimension, to defend climate policy, to defend equality between men and women, to defend human rights and the rule of law”.

The Spaniard criticised governments looking to curb spending despite the many challenges facing Europe — not least the cost of switching from fossil fuels to renewable energy. 

Richer countries, including the Socialist-led coalition in Germany, have so far blocked a European Commission proposal to increase the EU’s shared budget which would in part finance green industry subsidies and migration management measures.

They claim spending during the Covid-19 pandemic and in response to the war in Ukraine have depleted their coffers. 

“Austerity cannot be the response,” said García Pérez. “We need to push to guarantee the investment for European challenges. That means digital and ecological investment.”

She attacked rightwing parties for weakening recent climate legislation.

Calling for a “just transition”, she said: “We need to guarantee our planet. But we have to do it with this social dimension.”

The Socialists today are set to nominate Nicolas Schmit, the commissioner for jobs and social rights, as their lead candidate for the election. García Pérez dismissed criticism that the 70-year-old Luxembourger lacked a high profile. 

He set up Sure, a scheme which financed workers’ wages during the pandemic despite reduced hours or lay-offs, passed a minimum wage directive and pushed for a dedicated fund for regions affected by the green transition.

“Nicolas Schmit represents our policies very clearly,” she said.

Chart du jour: Far-right rising

The three parties in German Chancellor Olaf Scholz’s coalition have suffered a striking slump in popularity, as growing popular anger is increasing government tensions and boosting support for the far-right Alternative for Germany (AfD).

Fighting stance

As the European Union rethinks its approach to economic security, it should consider being more aggressive to protect its companies, according to a paper by the Paris-based Institut Montaigne, writes Paola Tamma.

Context: Over the past few years the bloc has found itself squeezed by heightened competition between the US and China, often in the form of trade restrictions. EU companies operating abroad have borne the consequences, resulting in higher costs.

So far, the EU’s response has largely been defensive, through strengthening its trade defence tools and seeking to cool disputes via diplomatic channels.

“This is short-sighted. The EU would be wise to consider a more offensive approach,” Georgina Wright writes in the Institut Montaigne’s analysis published today.

This could include creating an agency similar to Ofac, which is in charge of economic and trade sanctions enforcement in the US. The EU could also adopt secondary sanctions on third countries, and consider a fund to help companies struggling with financial and legal costs linked to trade disputes, the institute finds.

Wright acknowledges that the European Commission is indeed rethinking its approach to economic security, which it will outline in a paper next week, alongside revisions of screening rules for foreign investment. It will also float the possibility of outbound investment screening and co-ordinated export controls.

This is “signalling a subtle shift towards a more comprehensive approach to safeguarding all of the EU’s interests,” writes Wright.

However, it’s unlikely that EU countries would enthusiastically embrace a more aggressive stance and grant Brussels more power in this area.

“But this could change,” Wright adds. “Acting as a bloc of 27 is more effective than acting alone.”

What to watch today

1. Commission president Ursula von der Leyen returns to Davos, to meet the prime ministers of Greece, Iraq, Thailand and Tunisia, and the presidents of Israel and Serbia

2. Albanian constitutional court holds hearing on Tirana’s agreement with Rome to process Italian asylum claims

Now read these