The old continent at the crossroads
The latest elections have changed the makeup of Europe's central governments, leading to the dissolution of old coalitions and to the advance of new extremist or populist groups that rely on civil discontent to gain their support. And the prospects for the long-awaited EU reform are receding even further into the distance

Europe is moving in a new, uncertain and difficult direction. After an intense 18 month cycle of national elections that all began with the divisive UK Brexit referendum in June last year, the European Union has reached a cross roads. And it is still too early to see which road it will eventually take – the road to greater integration as France's President Emanuel Macron is strongly advocating or the road to greater fragmentation spurred by Eurosceptic nationalism, growing populism and the traditional divide between Europe's "calvinist" northern countries and its "catholic" southern member states. A few things are however sure. First, old European governing coalitions are no longer working. This has been the case in Austria where for the first time since the second world war an Austrian president has been elected without the backing of either the centre right People's Party or the centre left Social Democratic Party that have been collaborating for decades. Instead a member of Austrian Greens was elected narrowly beating the populist Freedom Party of Austria candidate. On Monday this week, after suffering its worst post war electoral result, Germany's centre-left SPD announced it would no longer participate in a governing coalition with Angela Merkel's centre right DCU/CSU party. Mrs Merkel won what many consider a pyrrhic victory with only 33 per cent of the vote that will force her into a prolonged and complicated negotiation to form an alternative coalition with the smaller liberal party and the Greens in a parliament that will see for the first time the populist nationalist Alternative for Germany AfD party sitting in noisy opposition.

The defeat of traditional parties and old alliances

Second, it is not just old coalitions that are unravelling but these are being replaced by a more fragmented political landscape in many member countries. Mark Rutte, the conservative Dutch prime minister, successfully fought off this year a strong challenge from Geert Wilders, the Party for Freedom populist leader. Rutte's VUD party however lost several seats making it even more difficult for him to build a new coalition. In the end, the Netherlands will be more politically fragmented than before. The same applies to the recent elections in Norway where the centre-right government was re-elected but with prime minister Erna Solberg seeing her parliamentary majority reduced. This means she now needs the support of all four centre-right parties to govern rather than three as in her previous term. This will give the smallest groups a strong opportunity to block things they disagree with such as opening up the picturesque Lofoten Islands to oil exploration. Third, as the Brexit referendum and the subsequent snap election this June in the UK have shown, voters in Europe and elsewhere are in an unpredictable mood. Anti establishment sentiment is on the rise but at the same time victories for populists are far from inevitable.

Riding the wave of popular discontent

In Norway, Europe's biggest oil producer, the centre-right was re-elected largely because voters recognised the government's success in fixing the economy that had been battered by the sharp slump in oil prices. In France, voters expressed their frustration with the traditional political parties and their concerns over the National Front by electing Emanuel Macron as the country's youngest president and supporting his newly formed political movement. In many respects, it was a populist vote for a non populist president given Mr. Macron's background firmly cast in the French technocratic elite. That said, they have already put Mr. Macron on notice. His movement suffered a significant setback in senatorial elections this weekend and his popularity domestically has been falling. As for Theresa May, the UK prime minster, she thought she had the election in the bag but badly miscalculated the anti-austerity mood in the country as well as the second thoughts of many voters over a hard Brexit and its implications a year after the referendum.

Immigration and the new radicalism

Fourth, the animosity towards traditional political and business elites has been exacerbated by voters' anxieties over immigration and its economic and social impact as well as the growing gap between rich and poor. Mrs Merkel certainly paid the price for her open border policy which saw 1million or more refugees flock to Germany n 2015-16. Controversy over immigrants has become a powerful rallying point for populist protest votes in many parts of Europe from the UK ( it was probably the single biggest reason why the vote to leave the EU prevailed), France and now Germany that has now seen the return of right wing extremists to the Reichstag. The irony is that all this political turmoil comes at a time when the EU economy is growing again and showing encouraging signs of having finally shaken off the impact of the financial crisis of 2008 . In other circumstances this would have provided a great opportunity to embark on an ambitious reform of the EU to address its current weaknesses and provide it with the firmer foundations to face future economic downturns if not full blown financial crises. That has been one of President Macron's big ideas – the most ambitious negotiation of eurozone reforms since the Maastricht treaty was signed in 1992 with the creation of a European budget, a European Monetary Fund and a European finance minister. In other words, far greater integration spearheaded by France and Germany.

Growing fragmentation in Europe

But economic success no longer automatically guarantees political success these days in an increasingly diversified and fragmented European society. Instead, the German election result, the long drawn out Brexit negotiations, the emergence of small parties in European politics are all creating obstacles to greater integration as countries and their voters show increasing signs of introspection. It will take months for Mrs Merkel to secure a new governing coalition and in the process she will probably have to bow to demands by her small coalition partners and their competing agendas including a call for less rather than more European integration. If the UK is facing its own psychodrama over Brexit, Spain is now also grappling with its own Catalan separatist nightmare. All in all Europe is at a crossroads and the choices ahead are full of longer term risks and uncertainty.