Next up to take on Europe’s debt crisis: Democracy

LONDON — For more than two years now, they have all imposed their will on Europe’s raging debt crisis: German leaders. Panicked governments. Jittery financial markets. Bossy international agencies.

The people? Not so much.

Across the continent, officials have forced through brutal budget cuts despite mass protests from Paris to Prague. In Greece and Italy, technocratic prime ministers have been installed without a single citizen going to the polls. Of the 25 European nations that have agreed to a new treaty limiting public spending, only Ireland is bothering to let voters rule on it.

But on Sunday, the people of France and Greece will have their say, in elections that have the potential to recast the debate over how to solve an economic unraveling that shows little signs of abating.

“Democracy is on its way into the euro crisis,” said Hugo Brady of the Brussels office of the London-based Center for European Reform. “While we don’t know what that means, it does mean the end of a solely technocratic response to it.”

Sunday’s elections are likely to see new leaders brought to power on pledges to revisit their countries’ strict adherence to the austerity and fiscal discipline prescribed by Germany as the cure for Europe’s ills. That the challenges come from these two countries is significant: France has been Germany’s most important ally, while Greece sits at the epicenter of Europe’s debt problems.

But changes to the current game plan could also unsettle investors allergic to the slightest whiff of uncertainty.

When they open Monday, the markets could greet a possible shift in strategy as welcome recognition that new ideas are needed to pull Europe out of its economic and financial tailspin. Or they could view it as a worrisome relaxation of fiscal stringency and push up borrowing costs for nations such as Spain and Italy, causing another escalation of the crisis.

But popularly elected governments should not allow markets to call the shots, said Juan Somavia, the director-general of the International Labor Organization.

“In a democracy, it is more important to retain the long-term trust of people — especially the most vulnerable groups — than to gain the short-term confidence of financial markets,” Somavia wrote in a recent opinion piece.

Popular backlash against the German fixation on austerity has been building momentum for months, in nations whose hurting middle classes say the cuts have only added misery.

Unemployment in the 17-member Eurozone is at a record high of 10.9%, an average that masks the dire predicament of countries such as Spain, where one in four workers is out of a job. At least half a dozen Eurozone nations, including Italy, Ireland and the Netherlands, have tumbled into a double-dip recession.

Increasing numbers of economists and analysts warn that the single-minded focus on belt-tightening is stunting growth, and without growth there is no way out of Europe’s financial hole. Many politicians have taken up that theme, coming around to a view that their exhausted constituents have been shouting and marching about for months.

“This austerity has to end, and both the political establishment here and Europe have to get that message,” said literature professor Magda Christidou, 48, who joined a May Day protest in Athens. “People are suffering. They’re jumping off balconies and hanging themselves because they can’t take it anymore. They’re sleeping on the streets because they’ve gone homeless.”

Greeks have seen their standard of living plunge after multiple rounds of budget cuts demanded by creditors as a condition of Athens’ two international bailouts. Yet another austerity package is to come before lawmakers next month.

Antonis Samaras of the conservative New Democracy party, which leads the opinion polls for Sunday’s parliamentary elections, has alarmed some European officials by vowing to renegotiate elements of the rescue deal, which he says is killing, not saving, the Greek economy. Anger over the harsh conditions has also boosted the fortunes of several fringe parties that are expected to win a crop of seats in the Greek Parliament.

Among them is Golden Dawn, a far-right, anti-austerity group that is on track for its strongest showing ever at the ballot box. Similar parties are on the rise across the region, including France, where the vociferously anti-Europe National Front scored a record 18% in the first round of the presidential election on April 22.

But even mainstream politicians are challenging policy decisions made in Brussels rather than in national capitals, or by powerful leaders such as German Chancellor Angela Merkel.

“It’s not for Germany to decide for the rest of Europe,” declared Francois Hollande, the French left-wing Socialist candidate who is expected to defeat incumbent Nicolas Sarkozy in Sunday’s runoff.

Hollande has become the highest-profile and most influential advocate of a reset of the current strategy to combat the debt crisis.

Although leaders and governments in other countries have fallen over the last year because of voter dissatisfaction with austerity, their replacements have not succeeded in changing the direction of Europe’s approach to the debt crisis, in part because Merkel and Sarkozy stood firmly together. But a President Hollande, as bland as some of his compatriots think him, would break up that cozy couple.

With public opinion behind him, he has promised to reverse some of Sarkozy’s cutbacks. Throwing down the gauntlet to Germany, Hollande also wants to revise the new treaty to cap public spending, which Merkel considers the cornerstone of her crisis-fighting policy.

France has not yet formally ratified the pact. (Neither has Germany, for that matter.) Hollande says that fiscal rigor can’t be the be-all and end-all, and insists that Europe come up with an agreement on measures to promote economic growth in suffering countries.

That view is gaining currency across the continent, on the streets and in the corridors of power, so much so that European leaders may cobble together such a deal at a summit next month.

“If they only cut, the economy won’t grow. That’s obvious,” said university student Mariona Cuyas, 18, who took part in a noisy protest in Barcelona last week against Spain’s brutal austerity measures. “We need to stimulate the economy, not cut it.”

For Brady at the Center for European Reform, time is of the essence. New fiscal compacts and philosophical discussions by leaders and “Eurocrats” are all well and good, but the present reality demands quick action.

“At some point, voters are going to have to step in and say, ‘Snap out of this navel-gazing and address the problems here and now,’” he said. “It could be equally destabilizing. But I have faith in democracy to do the right thing at the end of the day.”

henry.chu@latimes.com

Special correspondents Anthee Carassava in Athens and Lauren Frayer in Barcelona, Spain, contributed to this report.