“Energy costs are cascading into food, transport and housing, hitting lower- and middle-income households hardest,” Seamus Boland, president of the European Economic and Social Committee, which brings together trade unions from across Europe and advises the European Commission on economic and labor policy, told POLITICO. “Politically, that creates space for distrust — not just of national governments, but of European institutions’ ability to shield citizens from external shocks. It risks accelerating support for more protectionist or inward-looking approaches.”
France is the biggest prize. But it is not the signal in Europe that the center is crumbling.
In Bulgaria, the April 20 victory of Kremlin-friendly ex-president Rumen Radev has set incumbents around Europe on edge. In Romania, a coalition crisis could soon sweep pro-EU Prime Minister Ilie Bolojan from power. In Germany, the far-right Alternative for Germany is eyeing gains in September’s Saxony-Anhalt state election, having already broken into parts of western Germany far from its traditional eastern power base.
The Iran war will be in focus on Monday as deputy finance ministers from the EU’s 27 governments meet in Athens to discuss how to cushion the bloc from the economic fallout without plunging it into a debt crisis, according to two EU diplomats with knowledge of the preparations. Their bosses, the finance ministers, will pick up the debate next week in Brussels, as treasuries begin the arduous task of drafting national budgets for next year.
Alarm bells
When European leaders held a two-day summit in Cyprus last week as economy chiefs and experts convened in Greece, a common thread was prominent in private meetings, informal conversations and public statements: Europe’s economy is already weak, and the Iran shock threatens to make it politically explosive.
“As the blockage of Strait of Hormuz persists, it’s clear that its impacts are becoming more pronounced and also, some say, spreading through the broader economy,” European Commissioner for Economy Valdis Dombrovskis told POLITICO on the sidelines of the Delphi Economic Forum in Greece. “Our advice is to stay with temporary and targeted measures also to limit their fiscal impact, because fiscal space is now more limited already since Covid-19 and since the first energy crisis [triggered by Russia’s full-scale invasion of Ukraine] in 2022.”