Europe wobbles…

Italy, Spain and Cyprus all strike fear into the hearts of economists.

The Eurozone is heating up again, as the realisation dawns that previous settlements were merely uneasy hiatuses.

The immediate problem is Cyprus, which finds itself on the verge of default due to contamination from Greece. The country, a small island nation in the Mediterranean, has close historical and financial links with crisis-stricken Athens, and was forced to seek aid from the EU last year. Last month, the Wall Street Journal's Stephen Filder received confirmation in Davos from Olli Rehn, the EU's economics commissioner, a rescue program for the country will require "substantially reducing government and bank debt" — in other words, a default.

Such a default will be problematic, because Cyprus, more so than most troubled Eurozone countries to date, operates as an off-shore banker for many of the world's super-rich — particularly, in this case, Russians. The country is likely to find itself stuck between two unpalatable options: either safeguarding its banking sector from losses by imposing huge burdens on its populace, or risking a run on the banks from overseas as foreign depositors try to get their money out.

There had been hope that the country may be able to get a bailout from the EU without causing too much damage to its domestic banking operation, but over the weekend, that became less likely. The SPD, the German opposition party, pushed for the country to be forced to consolidate its banks before any bailout would be agreed. According to Reuters, Merkel needs the support of the SPD to pass any bailout through the Bundestag (and of course, the EU needs the support of Germany before any bailout can go ahead) so this objection carries real weight.

The Cypriot problem is nasty, but largely internal; the country is too small to have any real contagion effects. The same cannot be said of Italy and Spain, both of which are sources of increased uncertainty.

In Italy, Silvio's back! The former prime minister — who, if he were anyone else, would surely be the "disgraced" former prime minister — is running for office on a platform of tax cuts (€4bn of them) over austerity. His coalition is in second place right now to the centre-left grouping, but its standing is improving — and the markets appear to be getting jumpy at that fact.

Berlusconi is being hampered by the fact that he no longer controls Italian media in the way he used to, but even so, a win for him is still alarmingly possible. (Regardless of the effect of deficit-funded tax-cuts on national economies, Berlusconi is unlikely to plough a viable economic course for Italy).

And in Spain, prime minister Mariano Rajoy has been accused of running an illegal slush fund. Yesterday afternoon, Rajoy issued a not-entirely-convincing rebuttal, telling a joint press conference with Angela Merkel that:

I repeat what I said Saturday: everything that has been said about me and my colleagues in the party is untrue, except for some things that have been published by some media outlets.

Merkel, "visibly upset", was also asked about the corruption allegations, and emphasised that "what is important is the relationship between the two governments".

Whatever happens to Rajoy, Berloscuni, and even Cyprus, the flurry of attention and fear generated by what ought to be business as usual for politics (except, maybe, the Cyprus problem) demonstrates how uneasy the situation in Europe remains. While we haven't heard a huge amount about the crisis recently, as the big minds in economics get distracted by talk of robots (not that the potential problems there aren't huge either), the situation is by no means fixed. The continent remains in much the same straits as Britain, but with the added straightjacket of a unified currency and intransigent Germany dampening hope.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Europe's elections show why liberals should avoid fatalism

France, Germany and the Netherlands suggest there is nothing inevitable about the right's advance.

Humans are unavoidably pattern-seeking creatures. We give meaning to disparate events where little or none may exist. So it is with Brexit and Donald Trump. The proximity of these results led to declarations of liberalism's demise. After decades of progress, the tide was said to have unavoidably turned.

Every election is now treated as another round in the great duel between libralism and populism. In the Netherlands, the perennial nativist Geert Wilders was gifted outsize attention in the belief that he could surf the Brexit-Trump wave to victory. Yet far from triumphing, the Freedom Party finished a distant second, increasing its seats total to 20 (four fewer than in 2010). Wilders' defeat was always more likely than not (and he would have been unable to form a government) but global events gifted him an aura of invincibility.

In France, for several years, Marine Le Pen has been likely to make the final round of the next presidential election. But it was only after Brexit and Trump's election that she was widely seen as a potential victor. As in 2002, the front républicain is likely to defeat the Front National. The winner, however, will not be a conservative but a liberal. According to the post-Trump narrative, Emmanuel Macron's rise should have been impossible. But his surge (albeit one that has left him tied with Le Pen in the first round) suggests liberalism is in better health than suggested.

In Germany, where the far-right Alternative für Deutschland was said to be remorselessly advancing, politics is returning to traditional two-party combat. The election of Martin Schulz has transformed the SPD's fortunes to the point where it could form the next government. As some Labour MPs resign themselves to perpeutal opposition, they could be forgiven for noting what a difference a new leader can make.

2016 will be forever remembered as the year of Brexit and Trump. Yet both events could conceivably have happened in liberalism's supposed heyday. The UK has long been the EU's most reluctant member and, having not joined the euro or the Schengen Zone, already had one foot outside the door. In the US, the conditions for the election of a Trump-like figure have been in place for decades. For all this, Leave only narrowly won and Hillary Clinton won three million more votes than her opponent. Liberalism is neither as weak as it is now thought, nor as strong as it was once thought.

George Eaton is political editor of the New Statesman.