(Reuters) - Political convulsions in the euro zone have only just begun. Six prime ministers have been kicked out of office, protesters have occupied public spaces, nationalist parties have grown in popularity, and two countries have appointed technocratic leaders. And that was just 2011. The coming year is likely to prove even tougher on the economic front as the crisis continues to rage, austerity bites, and unemployment mounts. Euro zone countries are being forced to choose between fiscal discipline or the disintegration of their shared currency. Under pressure from Germany, governments have agreed to sign up for treaty changes that will require them to balance their budgets, pay down their debts, and give the European Commission in Brussels more power to interfere with national budgets. Such loss of sovereignty could provoke a backlash from the people - and boost the support of right-wing euro-skeptic parties such as France’s National Front. It’s possible that the treaty changes may not even get ratified.
The euro zone could start coming apart at the seams, not just economically but politically. Populist parties in northern Europe - such as the True Finns and Holland’s PVV - could gain traction by arguing that their citizens shouldn’t have to bail out the Greeks, the Italians, and the Portuguese. Meanwhile, pretty much everybody could grow unhappy with the Germans for dictating how to run their countries. Anti-foreigner sentiment could rise across the board. In a nightmare scenario, protectionism would return while border checks and capital controls would be reimposed.
The conventional view is that economic crises are the breeding grounds of extremists, particularly right-wing ones. Such worries are legitimate, but the economic and political strains of the present do not have to play out like a repeat of the 1930s. Everything depends on the actions of political elites and the general population.
For politicians, the most important challenge will be to contain the crisis without getting too far ahead of what the people are prepared to tolerate - both in terms of austerity and loss of sovereignty. The best bet is probably for the southern countries to emphasize structural reforms to boost long-term growth - such as pushing up pension ages, freeing up labor markets, and fighting corruption - rather than passing yet more short-term spending cuts and tax hikes that will drive their economies deeper into recession. For this strategy to be possible, the northern countries will have to cut the southerners some slack, which would require a significant change of mindset, especially from Angela Merkel, Germany’s chancellor.
Whatever is done on the policy front, there will be political upheavals. In some respects - the defenestration of incumbent prime ministers or presidents - the politics will be “normal.” This year may not be quite as dramatic as 2011, when half a dozen leaders, including Italy’s Silvio Berlusconi, Greece’s George Papandreou, and Spain’s José Luis Rodríguez Zapatero, bit the dust. But we will probably witness the biggest fall yet: that of France’s Nicholas Sarkozy, who is fighting off a stiff challenge from François Hollande, the socialist candidate. Some countries could also see big shifts in the political landscape as old parties collapse and new ones take their place. This outcome is most likely in Italy and Greece, where corrupt political elites, known in each country as “castes,” have for decades fed off the state rather than serving the public interest. Disaffection with traditional politics in both countries is high. When Berlusconi and Papandreou fell, it was telling that the opposition parties were not in a position to replace them. Instead, both countries turned to technocrats - Mario Monti, an economist and former European Commissioner, and Lucas Papademos, formerly vice president of the European Central Bank.
The crisis has created an opportunity for a break with the past. In Italy, Berlusconi’s center-right PDL party could easily fall apart. That might open the way for a stronger centrist group to emerge around the so-called Terzo Polo (or Third Pole) led by Pier Ferdinando Casini. There’s even a possibility that the new technocrats will develop a taste and aptitude for politics and create a new centrist political force of their own. In Greece, both Papandreou’s left-wing Pasok party and the right-wing New Democracy party are beset with internal rivalries. In each party, there are traditionalists, who tend to be euro-skeptics, as well as more centrist, pro-European modernizers. In one scenario, the modernizers on left and right could break away from their current colleagues and join with each other as well as some small center parties to create a new force.
But it won’t just be the politicians who determine how the political landscape changes. How the people behave will also be critical. Last year saw the birth of a new phenomenon: the Indignados. Hundreds of thousands of mostly young, largely apolitical nonviolent Spaniards occupied city centers in Madrid and Barcelona. They were objecting to austerity, greedy bankers, and incompetent politicians.
The Indignados were copied in Greece and in Italy, where they were called the Aganaktismenoi and the Indignati respectively. They were partly inspired by the mass rallies in Egypt during the Arab Spring, and they shared some ideas with the Occupy movements in the United States and Britain. But despite creating a lot of noise, the Indignados have not coalesced into a political force. That’s partly because they are diffuse, and partly because they haven’t developed positive programs. Their name gives it away: they are indignant about what is happening but tend not to have constructive ideas about what can be done better. In some cases, moreover, their protests were also hijacked by violent extremists. Such violence was mostly avoided in Spain, but in Athens protesters threw Molotov cocktails at the police, and in Rome the Black Bloc, an anarchist group, attacked banks, smashed windows, and set cars on fire. Although the Aganaktismenoi and the Indignati were not responsible, their cause suffered.
The slightly older educated middle classes, meanwhile, were largely silent in these southern countries. Sure, they were indignant, too, but they didn’t take to the streets in large numbers. Instead, they fumed in the privacy of their homes. They blamed their politicians for mismanaging their economies and destroying their wealth, but they have been largely passive. Admittedly, there have been a few attempts by this demographic to organize themselves. In Milan, for example, citizens campaigned via social media for Giuliano Pisapia, a non-traditional politician. He went on to defeat Berlusconi’s candidate, Letizia Moratti, in the mayoral race in May. And in Greece a group mainly composed of intellectuals set up an organization called Koinonikos Syndesmos, a pro-European pressure group campaigning for a new type of politics to serve the national interest rather than vested interests.
What euro zone countries now need is the engagement of their liberal-minded middle classes on a much wider scale. These groups need to slough off their natural passivity and organize themselves as a counterweight to the potential growth of extremism in the years ahead. However the financial side of the crisis plays out, the active involvement of constructive citizens could be an important element in stopping European politics from taking a very nasty turn.
Hugo Dixon is a Reuters Breakingviews columnist. Any opinions expressed are his own.