3. Rise of extremist parties. They seem to be ascendant everywhere in Europe these days, on the right and on the left. In Greece, Syriza threatens the bailout while the neo-Nazi Golden Dawn received nearly 7 percent of the vote in May’s elections. In Germany, the idiosyncratic Pirate Party has drawn a significant following. In France, Marine Le Pen’s far-right National Front and Jean-Luc Mélenchon’s Left Front are actually battling over the same voters, while in Italy, even corruption scandals and the resignation of its longtime leader, Umberto Bossi, hasn’t stopped the virulently anti-immigrant Northern League from playing a role in Italian politics. And Geert Wilders’s PVV has already caused one Dutch government to fall and continues to play an outsized role in the Netherlands.
Europe is not about to lurch dramatically left or right. But the rise of these and similar extreme parties pose two big problems — one short-term and the other long-term. First, they drastically increase the difficulty of forming stable coalitions, which in the European periphery makes imposing structural reforms and fiscal discipline hard and in the core makes agreement on comprehensive solutions even harder. The parliamentary structure of most European governments provides these smaller parties with disproportionate influence, as they are needed to create majority coalitions. Second, the extreme parties, both left and right, tend to be populist and anti-immigrant. Europe’s economic woes are already decreasing its attractiveness as a destination for immigrants; xenophobia only exacerbates this dynamic. But Europe desperately needs immigration to combat its declining demography and rejuvenate economic growth.