Analysis: Populists exploit euro zone crisis to gain influence

AMSTERDAM Thu Nov 17, 2011 12:22pm EST

AMSTERDAM (Reuters) - As the euro zone shudders, Europe's populist politicians from the Netherlands to Austria and Finland are exploiting its woes to build up support and even threaten some governments.

Such strong smaller economies at the heart of the euro zone, which have benefited significantly from membership, are unlikely to leave the euro unilaterally, as some far-right parties want.

However, right-wing groups are playing on public resentment at the cost of bailing out weak euro zone countries such as Greece to gain popularity.

In the Netherlands, eurosceptic politician Geert Wilders is staging a campaign which could push the minority government to the brink of collapse after barely a year in power.

Last week, Wilders proposed that the Netherlands should hold a referendum on whether to ditch the euro and embrace the Dutch guilder again, pending a study of the long-term economic costs.

"The return to the guilder is nonsense, it's a nonsense discussion," said Sylvester Eijffinger, professor of financial economics at Tilburg University. However, he added: "It's very dangerous for the survival of the cabinet."

The government relies on the support of Wilders's Freedom Party (PVV), even though it is not in the ruling coalition.

PVV won the third-largest number of seats in parliament in elections last year, mainly because of its tough stance on immigration and Islam. It has a pact with the coalition of Liberals (VVD) and Christian Democrats (CDA), giving the pro-euro government the majority it needs to pass legislation.

Wilders denies he wants to bring down the government over the euro but he is playing up a split on a major issue between the coalition and the party on which it relies for survival.

"The euro and Europe is the key element of our foreign policy. How can we have a split between VVD-CDA who strongly support Europe, and PVV? This is the most dangerous issue for our cabinet," Eijffinger told Reuters.

"If you disagree on such enormously important issues then it becomes harder and harder to avoid accidents. At a certain moment it will accelerate."

The Freedom Party has become the second-most popular party in Dutch opinion polls, mainly because it opposes the costly bailouts of the euro zone's heavily indebted members.

HEIGHTENED TENSIONS

Wilders, whom media dubbed the man in the Mozart wig because of his dyed-blond pompadour, has always voted against the government when it sought parliamentary support for bailouts.

But by proposing a referendum, Wilders has heightened tensions between his party and the government. The euro zone debt crisis has already toppled several governments and now threatens to engulf Dutch Prime Minister Mark Rutte.

Rutte has shot down the idea of quitting the euro, saying it would be disastrous for the export-oriented Dutch economy.

But his government has been criticized for supporting bailouts of countries such as Ireland and Portugal, and a stability fund intended for future rescues as the euro zone debt crisis spreads like wildfire to bigger economies like Italy.

Eijffinger said the cost to the Netherlands of returning to the guilder would be "a multiple of what we give to the stability fund, without any doubt."

For the Netherlands, the EU's internal market has a benefit of around 1,500 to 2,200 euros per citizen per year, and the euro itself bestows a benefit of around 500 euros, economic policy analysis bureau CPB said in a report this week.

"The consequences (of leaving the euro) for Dutch citizens, Dutch companies, Dutch banks, the entire system, including the state treasury would be enormous," said Finance Minister Jan Kees de Jager.

Yet opinion polls suggest many Dutch still hanker for the guilder, and resent having to pay for Europe's more profligate members, particularly while the Dutch government is cutting spending on healthcare, education, and social security benefits.

A poll at the weekend found 32 percent favored quitting the euro, 60 percent were against leaving, and 43 percent wanted a referendum on whether to return to the guilder. Another poll found that a majority wished the country had stuck with the guilder.

LOOKING INTO THE ABYSS

In Austria, Heinz-Christian Strache's Freedom Party has been railing for months against the bailouts, using big posters with the motto "Our Money for Our People."

The far-right party has called for a referendum only on whether to keep bailing out euro zone countries, although Strache has also advocated quitting the currency.

With elections due in 2013, Austria's Freedom Party is neck and neck with the governing Social Democrats and ahead of the conservative People's Party, the junior party in the coalition.

"Now even Paris and Berlin are thinking about splitting up the euro zone. We in the Freedom Party suggested this at the start of the euro crisis because in truth it is the only correct solution. This is the only way to save Europe," Strache said.

In an interview with the newspaper Oesterreich in May, he warned: "We have to get out of the euro before it plunges us into the abyss. We need a new currency along with other strong-currency countries."

In Finland, a populist party has also called for an end to the bailouts. The Finns Party, previously known as the True Finns, has warned that the country is risking its high credit rating by helping Mediterranean nations in trouble.

"The EU will become a debt and tax union, and eventually an income distribution union, where triple-A countries start to finance the south," party leader Timo Soini, now a presidential candidate, told parliament on November 8.

"Finland must not participate ... in these packages, because they do not work," he said. "Start to defend Finland's taxpayers!"

Such parties can influence the debate even if they are not in government. In Finland, some coalition parties have been forced to take a harder line by demanding that countries put up collateral in return for rescue funding.

However, the eurosceptic push could backfire, at least for Wilders. An anti-establishment figure, he prefers to wield power by shooting from the sidelines, analysts say.

Wilders would find it hard to form a coalition of his own as he has no real allies. Those on the left who agree with his euroscepticism disagree with his immigration policies, while those who back him on immigration are pro-Europe.

For Wilders's party, "the euro issue is an ideal issue to gain votes: however they do realize that when they are in power, they can do very little," said Arnoud Boot, professor at the University of Amsterdam.

(Additional reporting by Gilbert Kreijger in Amsterdam, Michael Shields in Vienna and Jussi Rosendahl in Helsinki)