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Time for bottom fishing in the euro area?

Things will probably get worse because the highly unpopular French government is squeezed by political forces from left and right urging more assertive economic and foreign policies. They see Germany as a hegemon dictating the proceedings to the rest of Europe. The French left is in disarray, but the rightwing parties are regrouping around a distinctly nationalistic agenda largely set by the strengthening far-right Front National (FN) — which is bristling at German hectoring.

“Dozing on a volcano”

German relations with Italy are also characterized by frictions about structural reforms and fiscal consolidation. Struggling with a recessionary economy, a record-high unemployment rate of 13.2 percent (with youth unemployment at 44 percent), and a first-ever general strike last Friday by two of the country’s largest trade unions against a center-left government, Italy’s labor market reforms and fiscal policies are hostages to the notoriously slow and complicated political process.

Some progress on both issues is being made, though. And, without naming names, Italy’s finance minister is complaining that these efforts are not being acknowledged (presumably by Germany). But there is much less discretion about that on the part of Italy’s political leaders the government has to depend on to implement these reforms. A number of them are regularly venting strident anti-German statements and demagogic calls for Italy to leave the euro area.

Spain’s fast-growing radical left movement Podemos (We can) is also drawing strength from hostility to devastating socio-economic effects of austerity policies advocated by Germany. Currently polling at close to 30 percent, Podemos is becoming a serious contender in next year’s general elections. This unprecedented political formation is feeding on a 24 percent unemployment rate, more than half of unemployed youth and nearly one-third of the working poor – “mileuristas” earning about €1,000.00 per month.

Read More Europe economy ‘not improving fast enough’: EU

Greece’s apparently more virulent radical left party – Syriza – has a popular support of 25.5 percent, slightly ahead of the governing center-right New Democracy Party’s 22.7 percent. The poll, conducted by Kapa Research and published today (Sunday, December 14) by To Vima newspaper, also shows that the Greek Socialist Party (PASOK), the country’s third-largest, polled at 6.7 percent.

If, as seems likely, the next Greek president cannot be elected by the parliament in the three rounds of ballots, starting next Wednesday (December 17) and ending on December 29, the Prime Minister Samaras seems inclined to call an election rather than align himself with Syriza.

But regardless of how this situation plays out, Syriza has enough political clout to complicate Greece’s painful economic adjustment by continuing to rail against austerity policies.

And what is Germany saying to all this?

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