May 26th : raising the probability of a "political bank run"

May 26th European elections saw a strong rise of radical/populist/anti EU parties across the Eurozone which control now approximately 1/3 of the EU parliament. This is a well expected consequence of the static stance of EU political elite in front of raising structural unemployment.
EU parliament seats breakdown. Source: The Economist.

So far, peripheral EU has been impressionably tolerant of historical high unemployment level and economic distress. However, time is playing an increasingly important role in the capacity of the public to digest unemployment and economic hardship. At one point, opposition to EU - which is labeled as the cause of all economic and social illness - may become an evident way to gain broad political ground. We could see Eurosceptisim shifting from radical/populist parties toward a broader part of the Eurozone electoral landscape.

The May 26th vote might have provided us with an open window on the next chapter in the EU crisis. As the Eurogroup is refusing any flexibility into the Maastricht treaty (namely budget deficit and gov debt level)  - which could have been implemented for a short period of time and/or adjusted to specific country in financial distress (Greece, Portugal et..) and/or refuse so far to consider Eurobonds - it slowly force Europeans to choose between an Europe with structural unemployment/decimated private sector spending or ultimately a break-up of the Eurozone.

This is quite a risky bet : as time goes by and unemployment stay high, the social forces at play will intensify and at one point it will trigger a snow ball effect: when the Eurosceptisim will be felt as broad enough in term of potential electoral support, it will accelerate significantly as it will resonate into larger political parties = the Political "Bank Run".

The passiveness of the EU political elite in front of the largest eco-social disaster since WWII, might remember to some the passiveness of EU as Hitler was annexing part of east Europe during the Anschluss - we all know how its ended..

Moreover, in a not so distant future as China will continue to rebalance its economy toward domestic consumption, it will be a growing source of demand/import and Germany exports will probably find a new heaven (currently >70% of Germany exports are intra EU) and Eurozone demand will as a result be less strategic for Germany. Therefore, the Eurozone will be significantly less economically attractive even for the most pro-Eurozone member...


% of Populist parties (source: The Economist)