By Geoffrey Smith
April 26, 2017

Good morning.

Whisper it quietly, but Europe’s crisis is over, at least for the immediate future.

By far the most important evidence for this extravagant claim is the French election result on Sunday. Barring a disaster, France will again commit itself to the EU’s institutions and aspirations in 11 days’ time, when Emmanuel Macron runs off against Marine Le Pen for the presidency. Not one of over 120 polls during the campaign has suggested Le Pen can win that run-off, and most show Macron winning by a margin of 2:1, well outside the margins of error experienced in 2016. France’s center-right politicians have rushed to endorse him, settling one of the most important variables in the contest.

More importantly, the French vote is part of a pattern of rejecting populism that is now firmly established. Austria and the Netherlands both turned down the chance to overturn the applecart in presidential and parliamentary elections too. Germany’s mainstream parties command well over 70% of the vote, making it all-but certain that populists on both wings will be easily marginalized in federal elections in September. The right-wing Alternative für Deutschland, which flourished in 2015/6, is imploding, having forced out Frauke Petry, the only one of its leadership half-way serious about trying to broaden its support.

The economy is also humming as the sense of crisis recedes. The Eurozone’s composite purchasing managers index hit its highest level in April since 2011. The EU Commission’s Economic Sentiment Indicator, which blends business and consumer confidence, is on a similar trajectory. The European Central Bank, which wrecked a nascent recovery back in 2011 with two ill-judged interest rate hikes, has avoided repeating its mistake: it has already committed to a program of quantitative easing running at least through the end of this year. While Mario Draghi may talk a little tougher after tomorrow’s council meeting, the reality is that monetary policy will continue to be extremely supportive.

All this is happening despite Brexit. Economic recovery, and the abatement (for now) of the migrant crisis, mean that the pressures that helped to trigger Brexit will be largely absent as the separation talks start. That will make it easier for the EU (and its key Franco-German axis) to defend its cohesion, and harder (albeit not impossible) for the U.K. to play off individual national interests against each other. Theresa May’s call for an unscheduled election shows very clearly who is under more pressure.

None of this is to say that problems of demographics, labor market sclerosis, migration and nativism, and the constant tension of national versus collective interests have gone away. They never can and never will. Nor is there room for complacency: the 13 million French votes for Le Pen and her leftist counterpart Jean-Luc Mélenchon are not so very far from the 18 million votes for Brexit last year.

But it is time for the Anglo-Saxon world to acknowledge that the Old Continent has mastered—however messily, however noisily and incompletely—a series of existential threats, and that the economic cycle is now giving it a chance to address those that remain. And it’s time for the prophets of doom, if not to give up their predictions of a collapse, then to be so good as to say exactly when and how it will be triggered. Because seven years of crying ‘Wolf!’ is more than enough and, pace Donald Trump, there is no stampede to follow Britain out of the door.

News below.

Geoffrey Smith


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