Welcome to the Backlash Era, Europe

“Yes We Can” may be a stale slogan in Obama’s America, but in crisis-hit Spain it is the rallying cry of a year-old radical-left party that is taking the country by storm. In a show of strength, more than 100,000 supporters of Podemos (the party’s name means “We Can” in Spanish) filled the streets of Madrid on Jan. 31 to protest against austerity, crushing debts, and the country’s corrupt political system — and demand change. The demonstrators don’t represent a fringe group, either. Podemos is leading in the polls, ahead of both the mainstream center-left and center-right parties in elections that will be held by the end of the year.

The election of a radical-left Syriza-led government in Greece on Jan. 25 has electrified European politics. After years of being told that there is no alternative to bowing to German demands for crushing austerity and wage cuts, the plucky Greeks have dared to stand up to Angela Merkel’s government in Berlin — and other Europeans have stood up and noticed. While the immediate focus is on the showdown between the new Greek government and eurozone authorities over demands for debt relief — and the (unlikely) possibility that Greece could end up ejected from the currency union — Athenian defiance is already having wider political repercussions.

Long accustomed to treating Greece as an unruly but ultimately submissive colony, horrified German policymakers and their eurozone minions can scarcely believe that it is in outright insurrection. (Just look at the body language of Jeroen Dijsselbloem, the bespectacled Dutch finance minister and head of the Eurogroup of his eurozone counterparts, at a press conference with his new Greek counterpart, Yanis Varoufakis, in this video clip.) Debtor-country governments that have obediently complied with the German diktat — notably Spain, Portugal, and Ireland — suddenly feel very exposed politically. Governments that have mounted a mild challenge to Merkel (think France and Italy) are in a delicate position: They spy an opportunity to advance their own agenda, while fearing that they may be outflanked by those with a more radical one. And not without reason; anti-establishment parties of various stripes have the wind in their sails.

Now that voters are no longer terrified by the financial panic that almost destroyed the euro in 2012, they are venting their fury at establishment parties and EU technocrats who have failed to resolve the crisis and whom they no longer trust to have their best interests at heart.

Can you blame them? After all, rich bankers and their creditors have been bailed out with taxpayers’ money, while poor schoolchildren and other essential services have suffered budget cuts. Nobody at the European Commission in Brussels has lost a job or even suffered a salary cut for imposing premature, excessive, across-the-board austerity, which unnecessarily cost 10 percent of the eurozone GDP — nigh on 1 trillion euros! — according to a study by a European Commission official who used the commission’s own economic model.

Whenever voters throw out a government, as they have done in nearly every election since the crisis began in 2008, officials from Berlin, Brussels, and Frankfurt — whom they did not elect and cannot hold to account — loudly insist that the incoming administration must stick to the failed policies of the outgoing one. Since voting for establishment parties of the center-left or center-right makes little difference, it’s hardly surprising that voters are seeking a genuine alternative. And for the moment this exists only on the extremes.

Sometimes, as in Greece and Spain, the insurgents are on the radical left. In Ireland, which is not due to vote until next year, Sinn Féin, a left-wing party that was formerly the political wing of the Irish Republican Army, has a narrow lead in the polls. In other cases, the upstarts are on the far right. In France, Marine Le Pen’s racist National Front is out in front, winning by-elections and pulling ahead in polls for the 2017 presidential election. In Italy, where reformist Prime Minister Matteo Renzi remains popular, all three main opposition parties — the far-right Northern League, the anti-establishment Five Star Movement, and former Prime Minister Silvio Berlusconi’s center-right Forza Italia — are now anti-euro.

Much of what the radical left proposes would be harmful, while Le Pen’s xenophobic and protectionist nationalism is loathsome. But the likes of Podemos are also right about important things. At a time when households, companies, and banks are all trying to reduce their debts at once, austerity leads to stagnation and suffering, not “stability,” as eurozone leaders claim. Budget cuts and tax increases have often fallen on the poor and vulnerable, not the politically connected rich. The political class in many countries is corrupt and in the pockets of vested interests, not least the banks.

More broadly, it is neither feasible nor fair for debtors to bear the full costs of the financial crisis. For every reckless borrower there is a reckless lender. In the eurozone’s case, those were primarily German and French banks, which lent vast sums to southern Europe, both directly and via local banks. While the bailouts of Greece, Ireland, Portugal, and Spain are portrayed as gestures of EU solidarity, they were in fact covert bailouts of those foreign banks that would otherwise have suffered huge losses on their reckless lending. Southern Europe’s huge debt burden — primarily private in Spain, mostly public in Greece — is stifling the economy and is unpayable in full.

Driving down wages depresses domestic demand and makes debt burdens even harder to bear. And the eurozone as a whole is too big and global demand too weak for everyone to follow Germany’s beggar-thy-neighbor strategy of suppressing wages to subsidize exports.

Nor is it politically sustainable for the eurozone to be run, in effect, by a German hegemon that acts in its narrow interests as a creditor rather than in the broader interests of the monetary union as a whole. If countries are to share a currency, they must do so as equals, with EU institutions representing the common interest, rather than acting as instruments for creditors to impose their will on debtors. Denying people basic democratic choices over how much governments can tax and spend is bound to lead to a backlash — especially when EU fiscal rules are economically harmful. “No taxation without representation” is the stuff of revolutions.

None of this is radical or extreme, let alone anti-European. Outside the eurozone, many sensible people of all stripes would agree with it. The tragedy of the eurozone is that the policy establishment in Brussels and national elites are destroying political support for the European project by advancing Germany’s selfish and destructive agenda as a creditor. With luck, they will change course before it is too late. After all, while Syriza and Podemos want to make the eurozone fairer, the far right wants to destroy the EU altogether. Europe urgently needs mainstream alternatives to Merkelism — or it risks a President Le Pen.

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