Today's Deep Diveis 1,201 words and an 8-minute read.
Austrian legislative elections on September 29 returned a victory for the far-right Freedom Party (FPÖ), the latest in a string of far-right election successes in Europe. Far-right political parties have won or made strong enough showings to challenge center and leftist parties in France, Germany, Italy, Finland, Sweden, the Netherlands and Croatia. The rise of the far-right reflects voters' dissatisfaction with the status quo and presages policy changes that will impact European politics, priorities and economic performance. International businesses operating in Europe face increasing uncertainty related to tariff and non-tariff market barriers, the free flow of goods and services, labor market dynamics and a host of EU policies, including implementation of Europe's Green Deal.
Drivers Behind the Shift to the Right
While all European countries have their own specific political dynamics, there are regional commonalities that shed light on voter preferences. The COVID-19 pandemic was a significant shock to European economies, from which they are still recovering. Economic growth has been low, unemployment elevated, national debt levels high and inflation devastating to household budgets. The EU requirement for national authorities to adopt budgetary discipline to drive down national debt, e.g. austerity measures, has left large segments of the region's population feeling financially disenfranchised, battered by a cost-of-living crisis, unaffordable housing and bleak job prospects, while the elite who are making the policies, grow richer.
Meanwhile, immigration from non-European countries, which developed from a trickle to a tidal wave between 2015 and 2024, has changed the demographics of European cities and fueled popular dissatisfaction over too-permissive immigration policies that are set by the EU, but enforced by national authorities. Immigrants are being blamed for freeloading off of welfare benefits and healthcare services, increasing crime rates and taking jobs away from citizens. Despite electing officials pledging to represent their interests, the popular sentiment is that the current political elite are not delivering and change is needed.
The political far-right have been able to exploit these grievances to mobilize new supporters and win seats in local, regional and national governing bodies, as well as in the European Parliament. Their message targets the working and middle class (the "true people"), singling out the establishment (the "political class") as the problem. The parties are led by charismatic leaders who promote a nationalist narrative, directing political participation to remove the intermediaries of the old political class. The messaging often plays on the idea that foreignness is counter to nationalism, and that globalization and Europeanization seek to deny national rights. More simply, the EU is run by powerful but distant elites acting in their own interests, not for the true people.
Not all far-right parties are the same. Some are anti-democratic and lean towards authoritarian views and practices. Some are Euro-skeptic, believing the institution can be reformed and its mandate reduced to economic or political coordination, while others believe the EU should be abolished. Broadly, however, the far-right is anti-immigrant, with some parties wanting the borders closed and others going further to call for settled immigrants to be expelled. Some far right parties embrace a neo-Nazi heritage, while others seek to distance themselves from their fascist roots.
Normalization of the Far Right
While far-right political parties have been marginalized in the past, with mainstream parties refusing to include them in coalitions, support and political accommodation have grown. With a few exceptions, far right parties have been relegated to the opposition. More recently, however, mainstream parties have been adopting some aspects of their political program, due to their popularity at the polls, such as policies on migrants and refugees. The greater success during elections, the more influence far right parties will have, even if they continue to sit in the opposition.
But far right parties are not destined to permanently remain in the opposition. In 2020, the far-right Brothers of Italy emerged as the country's biggest election winner and Giorgia Meloni became prime minister. The current government in Slovakia is made up of a coalition leftist party Smer (led by nationalist Prime Minister Robert Fico), left-wing Hlas, or Voice, party, and far right party Slovak National Party. In Austria, discussions are on-going; it is not yet clear if far right Freedom Party will be asked to form a government as the party that won the most seats, or if any other of the main parties would agree to sit with it in a coalition. In the newly elected European Parliament, far-right representatives control about a quarter of the 720 seats.
With this said, dominance of far-right political parties is not inevitable. If far-right parties fail to deliver and democratic institutions remain intact, voters could move in a different direction. For example, Europe's "green" parties have flourished over the past half-decade, yielding political influence far beyond their actual numbers. They are now on the retreat, facing criticism that their policies were too radical and too costly. Germany's Greens performed so poorly in recent elections, losing votes to the far-right Alternative for Germany (AfD), that its leadership stepped down. On the other hand, last year, the right-wing Law and Justice party was ousted by a coalition of parties that campaigned on promises to restore national unity, rule of law and cooperation with the EU.
Looking Forward
While centrists maintain a majority in the European Parliament, far right MEPs advocate for policies that could weaken EU policy and legislative powers in favor of member state authorities. For example, EU immigration policy is unpopular, even the newly revised version that takes a stronger line against illegal immigration. Some member states are already going their own direction by imposing border controls within the EU to stop illegal immigrants, prompting some to warn about the economic risks of ending Schengen and free travel with participant states.
Many far-right parties oppose the EU Green Deal, the EU climate and energy transition strategy. The laws and directives that have been formalized still require implementation over the next decade. The far-right parties could slow or stall implementation, if they are able to convince that aspects of the Green Deal unfairly reduce the competitiveness of EU companies and put too large of a burden on households, farmers, manufacturers. For example, the mandate to phase out the sale of new internal combustion engine cars by 2035 is being challenged by Italy, through a proposal to bring forward a planned EU review to next year, instead of 2026, in order to relax European CO2 emission performance standards. Revision of the mandate and emission standards risks creating uncertainty for an industry already struggling with slumping domestic EV sales and surging Chinese competition.
More broadly, the chauvinist nationalism advocated by many of the far-right parties challenges the idea of Europe and benefits globalism. They seek national policies of self-sufficiency and localized economies to reduce vulnerability. These views can lead to protectionist economic policies, such as tariffs or non-tariff trade barriers (such as industrial policy favoring domestic supply chains) and increased business tax rates. Anti-immigrant platforms can be operationalized through new security measures, discriminatory labor practices, limitations on international workers, impacting labor costs or availability of services. Risks to business, in addition to risks to the EU organizational cohesiveness and member states' liberal policy orientation, loom as the far right continues to gather steam.
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