With its monetary policy, the ECB encourages populists. Overspending countries have learned that fighting for reform at home is not worth it. And that the ECB will pay all the more willingly, the greater the “populist danger”.
At first glance, everything looks pretty Europe-friendly. This is where what belongs together grows together:
The capital market supports the great European narrative. Finance Manager Eric Lonergan, fund manager at M
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This narrative of a political mandate for the ECB is not only wrong, it is dangerous. The opposite of the desired effect is achieved. The populists are encouraged and fattened. They owe their successes, see France in the National Council elections, precisely to this apparent European solicitude, which in reality turns out to be a bonus program for populists:
1. The learning experience of all countries with excessive government spending is this: it is not worth fighting for internal reforms and announcing unreasonable demands on the voters. There is a third party who pays. And the voters know that.
2. The more the voters snuggle up to the populists and nationalists, that’s the pattern of the past decade, the more willingly this third party pays. It has become highly irrational economically for an Italian or French to support the domestic reformer when everyone sees and feels that there is an intrinsic connection between the “populist danger” and the size of the check delivered from Brussels or from Frankfurt .
3. Even with an absolute majority in the French National Assembly, Emmanuel Macron has not dared to raise the retirement age. Right and left populists were up in arms. So he raised the national debt rather than the retirement age.
4. The ECB helped him by suspending the Maastricht criteria, keeping interest rates low and finally buying up French government bonds themselves. It worked: but for the populists. Their voters are learning again and again that their vote for Marine Le Pen or the Left Bloc is like going to the ATM.
5. In Italy the same picture: The country is statistically and factually a rich country, only that the state does not succeed in reaching into the wallets of the upper middle class. Whoever attempts tax reform, or even effective tax collection, loses support. The Italians have understood that populist arousal can stimulate Europe’s generosity in the same way that a calf stimulates its mother’s udder by sucking it.
6. The crazy thing: The mother EZB holds out the udder before the calf has even thought about sucking. The government in Rome had not yet been able to talk to the capital market at all about how it would like to guarantee serious public finances and service the debts despite the ECB interest rate hike when the ECB held a special meeting.
With the result that the capital market was promised, over the head of the government in Rome, to prevent “fragmentation of interest rate levels” according to risk levels. The capital market was calm and the reformers were able to lie back and relax.
7. In the coming year, when Mario Draghi resigns as Italian Prime Minister, the populists will not have disappeared but will be stronger to take to the big stage again in Rome. Populist voting has become the most successful Italian business model of modern times.
8. This learning experience has long since reached central Germany. Social Democrats, Greens and Liberals have taken to fighting populism with populism. So that the AfD doesn’t do nonsense, you do nonsense yourself. See tank discount. Look at the relief package, for which 23 billion euros were burned without even touching on the causes of inflation. Now a tax-free inflation bonus is to be submitted later.
The Greens no longer want to be ecological and the Liberals no longer want to be critical of the state. So the Liberals pump up the national debt and the Greens burn the lignite. Eric Gujer, editor-in-chief of the NZZ, calls this political confusion centrist populism: “Populism is the dictates of the moment. Conventional populists and green-liberal neo-populists differ only in that some have no principles and therefore agitate all the more lightheartedly, while others first have to shred their party programs.”
Ultimately, this Europe-wide policy of populism to combat populism is leading to the extinction of the reformers. The reformer used to stand for the future, today for impertinence. “Those who want to live safely tomorrow must fight for reforms today” was Willy Brandt’s motto in 1972, with which he brought in the greatest electoral triumph for social democracy.
Europe cannot thrive on willed effortlessness and the trained ruthlessness of reaching for other people’s wallets. Wealth and power do not grow that way, only lethargy, bad moods and populism as a religion of momentary greed.
Conclusion: There is no sensible alternative other than this: the European premium for refusing reform must fall. Or Europe falls. Narcoticizing all contemporary problems with invented money works fine – until it goes wrong. Or to paraphrase Erich Kästner: “If you’re not afraid, you have no imagination.”
Gabor Steingart is one of the best-known journalists in the country. He publishes the newsletter The Pioneer Briefing. The podcast of the same name is Germany’s leading daily podcast for politics and business. Since May 2020, Steingart has been working with his editorial staff on the ship “The Pioneer One”. Before founding Media Pioneer, Steingart was, among other things, CEO of the Handelsblatt Media Group. You can subscribe to his free newsletter here.
