The EU Elections Were a Cry for Reform

The headlines in London heralded the jubilant Euro-skeptic parties’ surging success in this weekend’s European Union Parliamentary elections and the political "earthquake" that has shaken the continent. Anti-EU parties received the most votes here in the United Kingdom, and were the top choice in Denmark, France, and Greece as well.

Many analysts have pointed to anti-immigrant, anti-EU, anti-incumbent, anti-austerity, partisan preference, or a desire to regain sovereignty as drivers of the skeptics’ support. However, a deeper analysis suggests that at its core, the results represent a cry for collaborative action to achieve pro-growth reforms.

At first glance this appears to be driven by concerns about the EU’s pan-European mobility of labor requirements that are a draw to newly admitted Eastern European countries. Many prosperous member nations view this policy as a burden, rather than as a bridge to a more robust economic future.

Those complaints come from people at varied socioeconomic strata. My Bangladeshi taxi driver said the result was due to frustrations that the "Polish and Romanians" were "taking all the jobs because they are willing to work for less." He made a point to add "and they are all on benefits you know." My dinner guest, an executive, scoffed at the Polish guy on British TV complaining about the "Eastern Europeans" coming and "taking our jobs!" He went on to express his belief that the voters for the UK Independence Party (UKIP), only know where its leader stands on one issue: immigration.

But while anti-EU and anti-immigration expressions are the primary symptoms we witness, the cause is deeper.

The United Kingdom’s ruling Conservatives lost seven seats while the opposition Labour Party gained seven. This result should refute the claim that it is all about anti-EU feelings because the Tories are promising a referendum on EU membership, an action that Labour currently opposes.

There is no doubt that faced with prolonged economic conditions that suppress wages despite rising costs, people are less generous in their feelings towards new entrants to the labor force. Yet the root cause of their rising frustrations and pessimism about the future is the lack of economic growth.

Others seek to attribute the results to an anti-incumbent mood. This was the first election in over a century in the UK that was not won by either the Conservatives or Labour. In Spain, the two major parties’ — Popular and Socialist — garnered only 49 percent, losing vote share to upstarts. French President Francois Hollande’s Socialist party took a beating as well, getting just 14 percent of the vote.

It wasn’t all bad news for incumbents, however. German Chancellor Angela Merkel’s center-right party held off aspirants and remains the most popular faction in the nation and Italian Prime Minister Matteo Renzi’s center-left coalition held off a renegade leftist party run by comic Beppe Grillo.

While Germany’s result might not provide proof against the desire for sovereignty argument — many perceive Germany as the new EU sovereign — the strong results in Italy do.

Italy’s outcome undermines the anti-austerity argument as the Renzi government’s platform is more focused on radical economic reforms as the path to growth instead of a reversal of austerity measures.

The fact that center-right governments suffered dearly in the UK and not in Germany, together with center-left stumble in France and success in Italy suggests this was not a partisan statement either.

A deeper analysis is required. What then is the explanation that addresses the contrasting results in Europe’s four largest countries?

What do the winners have in common? Those that rejected the idea that the only path to reform is a reversal of austerity measures and instead focused on making their nations more competitive and instilling a sense of hope won. Those who did not, lost.

Both Merkel and Renzi have appealed to both sides to relieve burdens on investment and foster job growth. France’s Hollande stormed into office with an aggressive agenda in the opposite direction: more taxes and more regulations. He was perhaps the continent’s biggest loser.

If politicians on either side or the Atlantic are looking for a response to the jolt of EU Parliamentary elections, the answer is clear: face reality and collaborate to implement reforms that remove impediments to the initiative, risk taking, and investment required to return to vibrant economic growth.