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May 10, 2016

The decline of Social Democracy - Austrian edition

There is something depressing about the decline of social democracy in Europe. It is not so much that they are losing popular support, but that they are running out of ideas and are becoming rather small-minded. This is the common theme of our two main stories today - the resignation of Werner Faymann as Austria chancellor, and Sigmar Gabriel's preconditions for another grand coalition, which he now seems to be preparing for.

Faymann resignation yesterday was not entirely shocking. The pressure on him has grown since the disastrous first round in the presidential election where his candidate scored a disappointing 10%. The resignation happened as the mayor of Vienna, Michael Haupl, the true powerbroker in the SPÖ withdrew his support. Faymann has been presiding over a long period of decline - the SPÖ has lost 18 elections since he became chancellor. The party will appoint a new leader within the next eight days. It is possible that it may separate the position of party leader and chancellor, so that the party can have a separate identity from the policies of the government. The Austrian press names two people as potential candidates for Faymann's success - all managers. One of them is the head of the Austrian railway company, Christian Kern, who has no direct political experience. He is favoured because of the way he has managed the company. The other one is Gerhard Zeiler, a media manager who is now head of Turner Broadcasting in London. 

In a comment in Der Standard Alexandra Föderl-Schmid makes the point that there is a case to separate the functions. The governments needs a manager at the top to undertake much needed economic reforms, as the country is losing international competitiveness, and as unemployment is reaching historically high levels. A chancellor with business experience might provide such leadership. The party, however, needs a leader who is capable of providing a new direction. We are not entirely sure about her conclusions. But she seems to indicate that this could or should include opening up the party to an eventual coalition with the FPÖ, the right-wing populist party that came out top in the first presidential election round.

What we found profoundly depressing is the way the Austrian media discussed the pros and cons of the various candidates. In its main story, Der Standard notes that notes that Zeiler is ten years older than Kern. And as such he has much less to lose in terms of his own career development if he took over the job of chancellor, which the paper describes as a suicide mission. Whereas the 50-year Kern might be too young for such a desperate career move.

FAZ notes that the most astonishing accomplishment of Werner Faymann was his ability to become the second longest serving member of the European Council - after Angela Merkel. It recalls an incident when a journalist from Austrian TV discovered that Faymann faked his CV, by claiming law studies even though he did not complete a single semester. And when the FPÖ raised the question of where he managed to gain his high school diploma, he refused to answer. 

The idea of separating the jobs of head of the party and head of the government is too clever by half. The German SPD tried that during the Schmidt and later Schroder areas with bad electoral results. Schmidt was never SPD leader and regretted this because the separation in the end meant that the party failed to support the chancellor. There is no technical fix to a political problem.

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May 10, 2016

The decline of Social Democracy - German edition

Frankfurter Allgemeine has a wonderful reportage of a town hall meeting with Sigmar Gabriel, giving a good rendering of the despair in the once-great party that is now polling at 19.5%. The article quoted a woman in the audience, who said that the Hartz reforms have made it impossible for her to gain a full-time contract in the office-cleaning sector, where everybody is now working on fixed-time contracts. When she challenged the SPD's willingness to enter into a grand coalition with the CDU, the entire room exploded with applause. What we thought particularly interesting was that Gabriel already indicated his willingness to participate in another grand coalition after the 2017 elections. And he placed a rather weak condition for the SPD's participation in another CDU-led government: the abolition of the 25% lump-sum tax on interest income. This was a tax introduced under the SPD with Peer Steinbruck as finance minister, in order to combat tax evasion on capital gains tax. Whatever the merits of this tax, it seems a rather desperate and insignificant issue for the SPD to turn this into a precondition for a grand coalition. Who cares about this tax? Nobody in the audience did.

If the outcome of the elections reflects the polls, there will be two possibilities for a government: a grand coalition of CDU/CSU and SPD; or a coalition of CDU/CSU, FDP and the Greens. The latter is going to be hard to do. We don't see the Greens accepting a coalition with two conservative parties. So another grand coalition becomes a real alternative. The SPD is now clearly setting itself up for a similar development to what happened in Austria.

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May 10, 2016

Spain's left alliance

The deal between Podemos and the United Left (IU), announced last week, is now a reality. Among the sticking points were the ability of each party to retain their separate identity despite the electoral coalition, and the number of seats the smaller party IU could hope to get based on their placement on the joint candidate lists. Finally, it will be between 8 and 10, compared with the 2 seats they got when running alone last December. An analysis by José Fernández Albertos shows that the two parties together may get up to 17 seats more than running separately, more than a 25% increase. This depends on how many votes each party might lose due to mutual animosity of their respective voter base, and how much would be compensated by attracting new left voters. The PSOE hopes to be able to attack Podemos on its left turn, and capture moderate voters. According to the polls, the left alliance together with the PSOE would come ahead of PP + Ciudadanos but still come short of an absolute majority. 

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May 10, 2016

Erik Jones on the changing international system

Erik Jones notes that the international system seems to be abandoning the consensus of recent decades around free trade, multilateralism, and central bank independence, and all this at a time when the US seems poised to become more inward-looking and thus stop pushing to maintain or restore the previous consensus. On free trade, the argument that it enhances welfare has lost the upper hand over concerns for undesirable side effects. This ties in with the erosion of multilateralism. People around the world seem to no longer think that interdependence requires cooperation. Jones also finds it shocking that anyone would question monetary policy independence, despite clear evidence that monetary policy is a lot less effective if it responds to short term political pressures. So far, the US had taken it upon itself to encourage the development of international agreements, but this is threatened by the rise of America-first isolationism. As a result, we may be looking at a very different international system in the decades ahead.

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