While Eurozone leaders scramble to find a new bailout deal for Greece to put off the country’s inevitable exit from the euro for another few months, they may find two new crises about to hit them.
Spain and Portugal, two other weak euro economies, hold elections later this year with polls predicting results that will shake the damaged Eurozone even further – with one potentially deciding the very existence of Spain.
The Portuguese are on the verge of electing a radical Socialist government in October that may even have to team up with the Communist party to administer the country. As we wrote earlier this month, the country is heavily indebted but has been following through with the austerity measures demanded by the EU.
The country’s Socialist Party, however, has become more radical and its leader Antonio Costa has called for an end to “this obsession with austerity”.
“There must be an alternative that allows us to turn the page on austerity, revive the economy, create jobs, and – while complying with euro area rules – restore hope to this county.”
Polls put his party in the lead, but well short of a majority. However, he could govern by teaming up with the old Communist Party, whose support is also surging. The chances of Communists keep the government to the centre ground are, let’s face it, remote.
Meanwhile, the Spanish region of Catalonia will go to the polls in September in an election hailed as a vote on independence. The party of regional president Artur Mas has teamed up with other pro-independence groups in an electoral alliance with a simple message – vote for us and we will unilaterally declare independence from Spain.
Raül Romeva, who will head the new group, said: “If in this process, the Spanish state, through its political or legal decisions, blocks the autonomous government of Catalonia or the Catalan parliament, we will move forward with a declaration of independence.”
“(We are) going for broke. We are betting everything on this, no turning back,” he added.
The Spanish government has threatened to suspend Catalonia’s regional autonomy if it attempts to go ahead with the plan, but it too faces elections due by the end of the year. With the governing conservative People’s Party looking certain to lose its majority and the radical leftist ‘Podemos’ party threatening an upset, Spain’s central government could find itself too divided and chaotic to respond decisively.
Recent polls put the ‘Junts pel sí’ (Together for Yes) group well ahead of the opposition in Catalonia, almost touching the 50 per cent mark, making an independence declaration highly likely.
A weak Spanish state with a region intent on breaking away will be a nightmare for the Eurozone. As they struggle to stabilise Greece and keep it in the euro, they could find that another Eurozone member is literally about to break apart.
Catalonia is also one of the wealthiest regions in Spain, contributing far more to the country’s economy than most others. If it chooses to go it alone, one of the bigger Eurozone economies will find itself seriously weakened just as it starts to grappled with mass unemployment.
The question is: will EU leaders allow it to happen? If Catalonia tries to declare independence and the Spanish government is too weak to intervene, will EU minister step in impose order? They’ve tried their best with Greece and may yet succeed, so anything seems possible right now.
Time is running out for EU leaders. If they cannot keep Greece in line they will find it equally hard to control a Portuguese government just as radical as Syriza while one of the bigger Eurozone economies falls to pieces.
As Europe fragments and rejects the consensus that has kept it together for the past five decades, the future of the euro looks bleak.