Ratings agency Standard & Poor’s (S&P) has sounded an alarm over the eurozone’s stimulus policies, due to the rapidly growing influence of an anti-euro political party in Germany.
The Alternative für Deutschland (AfD) party has made significant progress in recent political polls and state legislature elections, regularly garnering between 9.7 per cent and 12.2 per cent of the vote.
Headed by former economist Bernd Lucke, the party argues that the bailout and recovery programmes put in place in the eurozone are detrimental to Germany’s interests and only benefit peripheral Europe.
S&P has issued a warning that the region’s credit rating could be under threat if the AfD party’s influence triggers a change in Germany’s political landscape.
Moritz Kraemer, primary credit analyst at S&P, has analysed the rise of AfD and predicted that the most likely outcome from its popularity will be to force chancellor Angela Merkel’s Christian Democratic Union (CDU) party back to the centre ground politically.
Mr Kraemer said: “Accordingly, we would envisage a rising probability of the CDU’s (and hence Germany’s) policy stance hardening towards euro area compromises.
“This could include less flexibility in easing the pace of fiscal adjustment of other European sovereigns, or resistance towards a coordinated pan-European investment plan that some European governments are aiming for.”
Mr Kraemer added: “Given that AfD’s economic programme is staunchly against government debt, fiscal easing in Germany has become even less likely.”
He said this could cause problems for the eurozone as a whole, because there were few signs that a recovery in the region had taken hold and any turnaround would need considerable support from Germany.
The analyst said he would be watching closely for any sign that Germany might be toughening its accommodative stance.
He predicted that the diminishing confidence of financial investors in the eurozone could potentially lead to rising government bond yields, particularly in the periphery.
“The rise in AfD support is therefore a new factor for credit markets to watch as the euro area struggles to emerge from stagnation,” said Mr Kraemer.
Until the rise of AfD, there had not been widespread support for a protest party within Germany, in contrast to the surge in popularity of eurosceptic parties, such as the UK Independence Party and the Five Star Movement in Italy.
But AfD has managed to succeed in uniting various groups of discontented voters.
As part of its economic programme, it has pledged to dissolve the euro and return to national currencies, as well as reducing government borrowing and devolving eurozone powers back to the individual nation states.
Although it was only formed in 2013, it has grown rapidly in popularity and managed to secure 7 per cent of the popular vote in this year’s European Parliament elections, which gave the party seven out of Germany’s 96 seats within the parliament.
Its support has grown since then, culminating in a 12.2 per cent share of the vote in the Brandenburg state election this month, which gave the party a total of 11 seats in the state’s legislature.
THE RISE AND RISE OF EUROPE’S PROTEST PARTIES
UK Independence Party
United Kingdom
While the history of the UK Independence Party (Ukip) dates back to 1993, it has seen a particular uplift in support since the financial crisis.
Led by Nigel Farage, Ukip’s aims and policies have broadened in an attempt to gain further support, but its original foundations lay in euro-scepticism, which is still the main draw for its supporters.
Ukip made history this year in the European Parliament elections when it became the first party, other than Labour or the Conservatives, to win a nationwide election for more than a century.
Five Star Movement
Italy
Led by charismatic comedian Beppe Grillo, the eurosceptic Five Star Movement surged to prominence in the 2013 Italian elections.
The party managed to capture 25.6 per cent of the popular vote in that election, the highest portion of the vote for any single party.
But it only managed to win 21.2 per cent of the vote in the 2014 European Parliament elections. Within the new European Parliament, it has now joined Ukip to form the backbone of the Europe of Freedom and Direct Democracy group.
Front National
France
Like Ukip, Front National has been a presence in French politics for some time, although unlike Ukip, Front National came close to seizing national power.
In the 2002 French presidential election, Front National beat the Socialist party to face off against the Union for a Popular Movement party in a run-off.
The party, led by Marine Le Pen, gained the highest share of the popular vote in this year’s European Parliament elections, with 24.9 per cent, which gave it 24 of the French seats in the parliament.
Syriza
Greece
Syriza has its roots as a protest party, although it is now the main opposition party to the Greek government.
The party, led by Alexis Tsipras, opposes the stringent austerity measures imposed on the country as a prerequisite of getting its bailout money. In Greece’s second general election of 2012, Syriza was narrowly beaten into second place in the popular vote by the New Democracy party. But the outcome was reversed in this year’s European elections, when Syriza triumphed with 26.5 per cent of the votes.
