The death of European anti-austerity says a lot about austerity

The great European revolt against austerity is already withering.

Nine months after Alexis Tsipras and his SYRIZA party surged to power in Greece promising to overturn Europe’s economic order, the radicals look a shadow of their former selves. Across the continent, voters alarmed by the prospect of chaos are returning to the devil they know. Greece’s election this weekend is too close to call and ballots in Portugal and Spain in coming months are unlikely to challenge the German-led budget-cutting regime.

“This is basically what politics is all about: a showdown of expectations versus harsh reality,” said Thomas Gerakis, head of the Athens-based Marc polling company. “The electorate is more mature, more wise, after being exposed to many serious events in a very short period of time.”

Rather than being the year the political landscape changed, 2015 is being defined by the failure of insurgents to move the needle of power. The European establishment has closed ranks, while the European Central Bank pumps billions of euros into bond markets in an attempt to get the economy moving, boosting incumbents across the euro area in the process.

Playing safe

Spanish Prime Minister Mariano Rajoy, whose cuts spawned anti-austerity party Podemos, will seek a new term after economic growth accelerated to the fastest in seven years.

Outside the single currency, the old guard is also prevailing.

In May’s election in Britain, David Cameron’s Conservatives won a surprise victory to set up a second term of budget cuts. The opposition was dismissed as a danger to jobs and economic growth and voters agreed. The anti-austerity campaign has been left to the nationalists in Scotland and a new leader of the Labour party, Jeremy Corbyn, who was an outside shot at getting the job and who some betting firms are giving less than 18 months.

“People are drawn to what is safest,” said Marta Cillero, 23, a student in Madrid and supporter of Spain’s Podemos, which surged in the polls before losing ground in recent months to the two biggest parties. “You can’t be naïve. You need to understand that it’s all politics.”

Neutered radicals

The claim of Greece’s SYRIZA, Spain’s Podemos and their allies to be standing up for society’s most vulnerable rather than investors ultimately wasn’t anchored with the kind of economics that was compatible with a Europe still struggling to recover from a grueling financial crisis.

Recent history showed others who threatened to break from the dogma established by Germany quickly fell into line, regardless of warnings from Nobel Prize-winning economists Paul Krugman and Joseph Stiglitz that austerity spelled unnecessary economic disaster for Europe.

French President Francois Hollande, a socialist elected in 2012 promising to impose a new tax on millionaires and end the grip of austerity, is now focused on trimming the budget deficit and increasing competitiveness.

Though SYRIZA, or the Coalition of the Radical Left, are likely to make it back into government, the radicalism has been neutered.

Third vote

Polls show the lead over the New Democracy party that lost power in January has all but closed after Tsipras ended up ditching SYRIZA’s more hardcore faction following six months of brinkmanship with the euro region over a new financial lifeline.

“The negotiations to reach an agreement with creditors were very tough,” said Vangelis Apostolou, a SYRIZA member of parliament running again this weekend. “In the end we had to make a shift toward maturity and realism.”

The election on Sept. 20 will be the third time Greeks have voted this year, and comes after a referendum on July 5 in which Tsipras’s opposition to bailout conditions was overwhelmingly endorsed. Despite the result of that ballot, Tsipras then capitulated to creditors’ demands to keep his country in the euro and ensure aid flowed to an economy that still has the continent’s highest debt burden and controls on bank withdrawals.

As a taste of financial meltdown became enough to alter direction in Greece, establishment parties elsewhere watched the battle play out and let voters draw their own conclusions about the risks of a leap into the unknown.

Catalonia, Portugal

In Catalonia, radicalism engendered by the financial crisis in Spain took the form of separatism.

President Artur Mas is heading for an inconclusive election on Sept. 27 with the latest polls suggesting that pro- independence parties might win most of the seats in the Catalan assembly without a majority of the votes. Mas indicated that such a result would weaken the legitimacy of his push to break away from Spain.

A week later, the Portuguese election on Oct. 4 is a two- horse race between the parties who have traded power since the early 1980s. The prime minister who implemented austerity to meet a 2011 bailout agreement might win a second term.

Polls suggest Spain will end up in a similar position when it holds a national election by the end of the year.

Podemos saw its ratings peak at 28 percent in a poll for El Pais in January as leader Pablo Iglesias stood shoulder-to- shoulder with Tsipras during the year’s first Greek election campaign. The party, only founded last year, said its plans to tear up the political and economic playbook still stand as unemployment, like in Greece, remains above 20 percent.

The largest parties “are on the defensive even as they claim that support for the two-party system has stabilized,” said Jorge Moruno, who belongs to Podemos’s nationwide council and is a long-term adviser to Iglesias. “A lot of the economic recovery is just a perception.”

[Bloomberg]