Europe is experiencing a new wave of nationalism and its eventual target could be the euro, according to Societe Generale’s Dylan Grice.Grice points out that in Finland, France, and Spain, there are signs that nationalism is on the rise in politics, notably to growth of the Front National in France under Marine Le Pen. Further, in Germany, anti-euro sentiment is growing, as taxpayers become more concerned about the costs of stabalizing the system.
Nationalist sentiment against immigrants could transfer to opposition to the euro due to the concept of “in-group bias,” a phenomenon that leads people to prefer their own rather than others, according to Grice. And the desire to define that outside group becomes more severe under stress, according to research from the University of Kansas Grice cites.
Grice believes that the rising costs of supporting ageing populations are going to put further stress on already financially challenged populations, which will exacerbate the problem of in group bias, drive further nationalism, and create more problems for the euro.
I believe what we are seeing is the beginning of the eurozone’s credit crisis, not the end. The historic and psychological evidence clearly links economic dislocation with the scapegoating of out-groups and, of course, the eurozone edifice stands increasingly lonely and tall as a lightning rod for the latter. I believe the likelihood is that over the course of the next decade or so, the trend will be towards greater fiscal problems and greater economic problems. I believe these problems will increase the temperature of debates about whose fault it all is, and that as the conclusion to these debates becomes more polarised they will play into the hands of nationalist, anti-immigrant and increasingly, anti-euro sentiment.
As a potential source of further economic stress, Grice suggests the rising costs of pensions for ageing populations. He estimates unfunded EU pensions to be worth 400% of GDP, the funding of which will lead to more austerity, more stress, and potentially more nationalism.
And that’s nearly 40% of GDP per worker, if growth is slow in Europe.
Photo: Societe Generale