Paul Anderson, New Times, February 2000

Five years ago, the prospects for west European social democracy did not look particularly bright.

At the start of 1995, of the five largest countries in western Europe, only Spain had a left-of-centre government – and the Spanish Socialist Workers Party (PSOE), mired in scandal after 13 years in office, looked certain to lose power at the next general election. The British Labour Party had been out of office for 16 years, the German Social Democratic Party for 12. The French Socialist Party was still in disarray after losing power to the right in humiliating fashion in the 1993 National Assembly elections. In Italy the Democratic Party of the Left (PDS) was in opposition just as its predecessor, the Italian Communist Party, had always been.

The electoral picture was not entirely bleak. The Party of European Socialists was the largest group in the European Parliament, and social democratic parties were in government in all the smaller west European countries apart from Portugal. Labour in Britain was riding high in the opinion polls under Tony Blair, and the PDS in Italy was cautiously optimistic about doing well when it next faced the voters in a general election.

But Labour and the PDS had flattered to deceive many times before, and several of the social democratic parties governing in smaller countries – the Belgians, the Greeks, the Swedes, the Danes and the Norwegians – were struggling in the opinion polls.

More important, behind social democracy’s electoral weakness there seemed to be a real crisis of ideological confidence.

To simplify somewhat, from the 1950s until the late 1970s social democrats in western Europe’s democracies, whatever the differences in their particular circumstances, had a common project. They were the workers’ party of the Keynesian welfare state consensus that embraced centre-left and centre-right – the democratic socialist alternative to communism. Their role in government was to secure low unemployment at national level by way of demand management and other interventionist economic policies; to redistribute income using progressive taxation and expansion of welfare provision; and to extend workers’ rights.

This common project collapsed as the Keynesian welfare state consensus disintegrated under the combined pressures of inflation, the concomitant rise of free-market economics (not just as policy-makers’ orthodoxy but as populist politics), and the growing power of the financial markets. During the 1980s, sooner or later and more or less explicitly, every west European social democratic party was forced to rethink what it was about.

There were, it seemed, two options, though they were by no means exclusive. One was to become ideology-free, adopting a rhetoric of modernising pragmatism and a practice of patronage (if not corruption). The other was to embrace Europe as the saviour.

From the mid-1980s, particularly after former French finance minister Jacques Delors established himself as president of the European Commission, a new common social democratic project emerged (at least among party leaders) according to which the best means of achieving traditional social democratic goals was to combine economic prudence and defence of the welfare state at home with vigorous pursuit of European economic, social and political integration – a single European currency matched with a growth-oriented European macroeconomic policy (‘Eurokeynesianism’, as it became known), common European social standards and a common democratic polity.

What no one had expected, however, was the collapse of communism in eastern Europe. The fall of the Berlin Wall and German unification not only scuppered the electoral chances of the German SPD but also put the skids under the grand project of European integration. The high interest rates adopted by Germany to deal with the inflationary pressures unleashed by unification forced austerity on every other country aspiring to join the planned single currency – which was a major factor in the French left’s defeat in 1993. Governments of the right then combined to block Delors’ plans tentatively Eurokeynesian plans for expanding the European Union’s capacity for macroeconomic management. By the end of 1994, the social democrats’ late-1980s dreams had been well and truly shattered.

Yet today, remarkably, social democratic parties are in power in all but four west European democracies (Spain, Norway, Ireland and Luxembourg). Crucially Germany, France, Italy and Britain, the four largest countries, all have governments formed by social democrats or in which social democrats are the dominant coalition partner. Although the picture is by no means completely rosy — the Italian centre-left looks likely to lose to the right at the next general election, the Austrian social democrats appear to be on their way out of government and social democrats did poorly overall in last year’s Euro-election — the electoral fortunes of west European social democracy have recovered remarkably.

What has not yet happened, however, is the emergence of a new common west European social democratic project that goes beyond establishment of the single currency.

In the wake of the collapse of Delors-style Eurokeynesianism, the main social democratic parties went their separate ways. Under the leadership of Tony Blair, British Labour, which had been the least enamoured of Eurokeynesianism, turned increasingly to the United States for inspiration, enthusiastically adopting the mantras of labour market flexibility and deregulation. In France, the PS in opposition first swung to the left then, under Lionel Jospin’s leadership, adopted a programme built around job creation through introduction of a 35-hour week, the platform on which it won the 1997 National Assembly election. In Germany, the SPD floundered around after losing the 1994 Bundestag election then rallied behind the Eurokeynesian Oskar Lafontaine before choosing the pro-business populist Gerhard Schröder as its candidate for chancellor in 1998. The preoccupation of the Italian PDS, the first of the ‘big four’ social democratic parties to win power, was introducing the spending cuts necessary for Italian entry into the single currency.

There has, of course, been one notable attempt to give coherence to contemporary social democracy, Blair’s Third Way initiative — essentially an endeavour to find common ground among European social democrats and Clinton Democrats in the US. It has successfully brought together party leaders and intellectuals in a series of high-level seminars, but its limits became apparent after the publication last June of its most substantial statement to date, a joint pamphlet by Blair and Schröder, The Third Way/Die Neue Mitte.

Virtually ignored in Britain, the document caused a major fuss among continental social democrats disturbed by what they saw as its over-enthusiasm for deregulation and market forces. Jospin pointedly made it known that he had declined to sign it, and the left of Schröder’s own party denounced it vehemently, blaming it for the SPD’s poor performance in the Euro-election that immediately followed its publication. By the time of the Socialist International congress in Paris last autumn, Schröder had effectively disowned the pamphlet, and the declaration agreed by that congress (and endorsed by Blair) was noticeably more critical of the impact of globalisation and the power of the markets.

Sweeping ideological statements do not necessarily count for much, and there is a case for arguing that the differences among west European social democratic governments are in practice much smaller than they appear. All are grappling with the same big problems: how to make the euro work, how to reform the European Union in the run-up to its enlargement into eastern Europe, how to ensure that West European labour costs are globally competitive at the same time as preserving strong welfare states, how to tackle social exclusion. And in many areas all are coming up with similar solutions: prudent macroeconomic policies, heavy investment in education and training, reduction of certain welfare entitlements, tax breaks for business and so on.

But it would be wrong to downplay the differences too much. It should not be forgotten that Britain, Denmark, Sweden and Greece are outside the inner core of members of the single currency. On several key questions in the past year or so there have been serious policy disagreements at EU level among the social democratic governments, notably over EU institutional reform, workers’ rights and tax harmonisation, most of which have seen the British government at odds with the rest. There are also real contrasts among social democrats’ policies in those areas that are the sole concern of national governments. Jospin’s keynote policy, the 35-hour-week, is completely at odds with the thrust of the Blair government, while British Labour’s embrace of workfare horrifies many continental social democratic leaders.

Nevertheless, with the euro in place it is difficult to imagine anything but a convergence of social democratic perspectives in the long term, at least among parties in the euro-zone. The big questions are how quickly it happens — and whether Labour plays an active role in the process or watches from the sidelines.

Country by country

The German Social Democratic Party (SPD) returned triumphantly to power in the September 1998 Bundestag election after 16 years in opposition – but for the next year it was downhill all the way for chancellor Gerhard Schröder’s red-green government.

First, the chancellor, a pragmatic pro-business populist, clashed with the Greens over the timetable for phasing out nuclear power and over extension of German citizenship to immigrants not of German ethnic origin. Then, early last year, Schröder and his finance minister, Oskar Lafontaine, the SPD’s party chief and darling of its left, had a series of spats in public over the latter’s criticisms of the anti-growth bias of the European Central Bank and his plans to shift the burden of taxation from workers and their families to business. In March, Schröder forced Lafontaine’s resignation and replaced him with the business-friendly pragmatist Hans Eichel, who provoked outrage on the SPD left and in the trade unions with a budget cutting public spending.

Meanwhile, the government’s support for Nato’s military intervention over Kosovo caused further ructions, with a significant minority of the Greens disowning Green foreign minister Joschka Fischer for backing the bombing of Serbia. And after Schröder’s publication of a pro-market joint declaration with Tony Blair, The Third Way/Die Neue Mitte, was followed by a disastrous SPD performance in the June Euro-elections, the SPD was plunged into a summer of controversy over its general direction.

In the autumn, Schröder’s woes were exacerbated by a string of humiliating defeats in state and local elections at the hands of the centre-right Christian Democratic Union and – in what was East Germany – the former-communist Party of Democratic Socialism (PDS).

Since then, however, Schröder’s fortunes have improved dramatically. He skilfully won back the support of the SPD left by appearing to distance himself from his joint statement with Blair and by taking interventionist stances on the take-over of the telecommunications giant Mannesman by UK-based rival Vodafone and on the rescue of the construction company Hollzmann. At the SPD national congress in December, he took 86 per cent of the vote in elections to the SPD executive.

Soon after placating the left, he won back some support from business with the announcement of major tax-breaks. And last month he won plaudits all round for the successful negotiation of a joint declaration with trade unions and employers, whereby unions will tie wage demands to productivity gains in return for introduction of retirement at 60.

What has really given the government a fillip, however, is the scandal over political funding that has swamped the CDU in the past three months, destroying the reputations both of former chancellor Helmut Kohl and of his successor as CDU leader, Wolfgang Schäuble. With the German economy recovering at last from the downturn that followed unification, Schröder now appears to have a good chance of winning a second term in office – something that seemed impossible as recently as three months ago.

The French left surprised even itself with its victory in the June 1997 National Assembly election. After dominating French politics in the 1980s as never before under the presidency of François Mitterrand, the Socialist Party (PS) crashed to ignominious defeat in the 1993 National Assembly election and did even worse in the 1994 Euro-election. There were signs of recovery in 1995, when its candidate for the presidency, Lionel Jospin, was beaten only narrowly by Jacques Chirac, and over the next two years the PS rose steadily in the opinion polls. But when Chirac called a snap parliamentary election in spring 1997, essentially as a vote of confidence in himself, few expected Jospin to lead the left into government.

In the event, however, the respectable parties of the right, the Gaullist RPR and the centre-right UDF, suffered massive losses, particularly to the far-right National Front. The PS, promising a massive job-creation programme based on cuts in working time, emerged as far-and-away the largest party, and Jospin cobbled together a PS-dominated coalition government with the French Communist Party (PCF), the Greens, the tiny Radical Socialist Party (PRS) and the Eurosceptic Citizen’s Movement (MDC) as junior partners.

Since then, the government has had a remarkable run of luck. After a long period of recession, the French economy has been growing strongly for the past two years, and the right has been in disarray.

Jospin’s keynote policy, the 35-hour week, at first faced vigorous opposition from employers, but many now acknowledge that it is being introduced in a way that will allow flexible working practices hitherto intolerable to the trade unions.

Similarly, although there have been tensions too inside the ruling coalition – with the PCF objecting strongly to Jospin’s backing for the Nato military intervention in Kosovo and the Greens demanding greater representation in the government after their good showing in the June 1999 Euro-election – Jospin has generally handled relations with his partners with aplomb. He steered clear of a confrontation with the left over the Tony Blair/Gerhard Schröder joint statement The Third Way/Die Neue Mitte by declining to endorse it and emphasising the French left’s more critical approach to the market.

The only major problem for Jospin came at the beginning of last November, when his finance minister, Dominique Strauss-Kahn, a key ally, was forced to resign in the wake of serious corruption allegations. Yet the demise of DSK appears to have done Jospin no damage in the opinion polls. On current evidence, he has an excellent chance of defeating Chirac for the presidency in June 2002.

Italy’s centre-left government, led by the Democrats of the Left (DS) – formerly the Democratic Party of the Left (PDS), formerly the Italian Communist Party (PCI) – is technically little more than a month old.

In reality, it is pretty much the same – in personnel, policy and vulnerability to collapse – as Italy’s previous centre-left government, which fell just before Christmas after three tiny parties withdrew their support. DS prime minister Massimo D’Alema was out of office for less than 48 hours before returning to form a new administration containing nearly all the same ministers as the old.

Italy has been notorious ever since the fall of fascism for having governments that collapse as a result of intrigue and are replaced by remarkably similar ones. But since the April 1996 general election the governing coalitions have been built not, as previously, against the PCI and its successors, but around the PDS/DS – until October 1998 with the centrist technocrat Romano Prodi as prime minister and subsequently under D’Alema.

The record of the former-PCI’s first foray into government has been mixed. On one hand, the Prodi/D’Alema administrations have succeeded in their main declared aims of ensuring fiscal stability and of taking Italy into the European single currency. On the other, they have failed to From 1996 to 1998, Italy was governed by a centre-left gova centre-The 1996 election saw the PDS-dominated centre-left Olive Tree alliance, with the centrist technocrat Romano Prodi as prime ministerial candidate, emerge as the largest group in the Chamber of Deputies but without an overall majority. The largest component of the Olive Tree was the PDSAll three governmentThe present government is not very different from the one before last either, although that was led, from April 1996 to October 1998, by Romano Prodi, a centrist technocrat chosen by the PDS-dominated centre-left Olive Tree alliance as its prime ministerial candidate for the April 1996 general election. Prodi’s was the first Italian government to include the PCI or a successor party.

In the April 1996 general election, which gave Italy a left-dominated government for the first time, Rifondazione, created by members of the old Italian Communist Party (PCI) who opposed its transformation into the Democratic Party of the Left (PDS) in 1991, won nearly 9 per cent of the vote. That gave Rifondazione 35 seats in the chamber of deputies – enough to make it an essential ally of the PDS-dominated “Olive Tree” coalition whenever the right and the regionalist Lega Nord voted together in parliament.

Until discussions began on the budget, Rifondazione was broadly supportive of the government, flexing its muscles only intermittently. But it consistently made clear that it would not back large-scale reductions in welfare spending merely to allow Italy to take part in EMU. Bertinotti and his party would have lost the substantial credibility that they have patiently built up with working-class voters if they had not used all their leverage over pension rights. Italy’s economy is doing well, and many voters do not see why they should go through yet another bout of austerity.
Equally important, Rifondazione was not the only one playing intransigent over the budget. Bertinotti had made it clear that, although he needed a concession, he was open to suggestions about what precisely it should be – and it is likely that agreement could have been reached had it not been for the inflexibility of PDS leader Massimo D’Alema.

D’Alema was quite happy to see the collapse of the government because he wants an early general election, which he believes would return a PDS-centre government that would not have to rely on the support of Rifondazione – and would thus have far greater freedom of manoeuvre.
He might be right. The main right-wing party, Silvio Berlusconi’s Forza Italia, is doing poorly in the opinion polls and is tainted with corruption. There is a good chance that the Olive Tree coalition, making the most of the voter-appeal of its latest recruit, Antonio Di Pietro, the investigating magistrate who became a popular hero for his pursuit of political corruption in the early 1990s, would make substantial inroads into the territory formerly occupied by the Christian Democrats.

There is, however, a big problem with D’Alema’s strategy. The president of the republic, Oscar Luigi Scalfaro, who alone has the power to appoint prime ministers and dissolve parliament, does not want a snap election and is doing all he can to create a new government without one. If he succeeds, D’Alema will not be easily forgiven by many in the PDS for the part he played in throwing power away.

Spain holds its next general election on 12 March. Opinion polls suggest small gains for prime minister José María Aznar’s centre-right Popular Party (PP), which has governed with the support of regional nationalists since ending 14 years of Spanish Socialist Workers’ Party (PSOE) government under Felipe González in 1996.

Aznar – the only centre-right leader to express an interest in Tony Blair’s Third Way – wants to make the election a referendum on his economic policies and on his tough stance against the Basque separatist guerrilla group ETA, which abandoned its cease-fire late last year.

Yet, although the Aznar government’s economic record is undoubtedly impressive – it managed to get Spain into the single currency and has seen unemployment tumble – the PP’s lead over the PSOE in the opinion polls last month remained less than 5 percentage points. That is smaller than at the beginning of the campaign in 1996, when it eventually won by just 1 percentage point, so an upset cannot be ruled out.

Leading the PSOE into the election is Joaquín Almunia, a right-wing associate of González chosen as prime ministerial candidate last summer to replace the left-wing populist José Borrell after the latter’s resignation over allegations that two former colleagues had committed fraud.

The Dutch government since 1994 has been what at first seemed a bizarre coalition between the Labour Party (PvdA), traditionally the defender of the welfare state, and two parties committed to cuts in welfare spending, the centrist Democrats 66 and the free-market-liberal People’s Party for Freedom and Democracy (VVD).

But, with the exception of a hiccup last summer after the governing parties lost ground in the Euro-election, the ‘purple coalition’, with the popular PvdA leader Wim Kok as prime minister, has proved remarkably successful. It has presided over a period of strong growth – the Netherlands now enjoys full employment – and its ability to introduce labour market and welfare reforms by negotiating compromises with business and trade unions has won widespread admiration. In the 1998 general election, the coalition was comfortably returned to power (although the PvdA and VVD gained at the expense of D66).

How long the party lasts is a moot point, however. Many commentators say that the economy is in danger of overheating, and there are signs that unions are uneasy about maintaining wage restraint in the face of spiralling corporate profits.

Last June, Belgians reacted to string of political scandals – the most important over the contamination of food with dioxin – by voting decisively against the Christian Democrats and socialists who had dominated the country’s coalitions for 40 years. The new government, a novel combination of liberals, socialists and greens from both francophone and Flemish linguistic communities, has made much of its intention of cleaning up Belgium’s discredited political institutions – and so far it has enjoyed an easy ride, helped by strong economic growth. It remains to be seen, however, how long the coalition will be able to avoid the francophone-Flemish wrangling that has long characterised federal Belgian politics.

The Greek political scene has been dominated since 1981 by the Pan-Hellenic Socialist Movement (Pasok), which has spent only four years (1989-93) in opposition. The popularity of the current government, led by prime minister Costas Simitis, suffered as a result of its support for Nato’s military intervention over Kosovo last year. But it has won plaudits for its economic management, presiding over strong economic growth and taking Greece to the brink of membership of the single currency. Pasok is likely to be returned to power, albeit narrowly, in the general election due by October.

Last October’s Portuguese general election was undoubtedly a victory for the Socialist Party (PS), which had been in minority government under prime minister Antonio Guterres since 1995, taking Portugal into the single currency and latterly enjoying strong economic growth. But it did not yield the overall parliamentary majority that Guterres, a popular and dynamic centrist moderniser, had hoped for, largely because of a strong showing by the joint list put forward by the Communist Party (PCP) and the Greens. Portugal holds the EU presidency for the first six months of this year and will play a crucial role in determining the shape of the intergovernmental conference on reform of the EU’s institutions that begins later this year.

The single biggest question facing Sweden’s ruling Social Democrats (SAP), in power with a co-operation agreement with the former-communist Left Party and the Greens, is whether they should back Swedish membership of the single European currency. Prime minister Goran Persson is in favour, and he hopes a party congress in spring will back him – but the result is by no means certain because of worries about what the euro means for Sweden’s still impressively generous welfare state. Even if he gets his way, he could be in trouble if the Left Party and the Greens, both anti-euro, decide to ditch co-operation – and then there is the challenge of winning a referendum.

Austria was thrown into turmoil by last October’s general election, in which the far-right anti-immigrant Freedom Party (FPO), led by Jorg Haider, narrowly took second place ahead of the Christian Democrat People’s Party (OVP). OVP leader Wolfgang Schussel had promised to abandon coalition with chancellor Viktor Klima’s Social Democratic Party (SPO) if his party failed to come second, and it took until last month for Klima to persuade the OVP to resurrect the arrangement that has governed Austria since 1986. How long the deal holds is a matter for conjecture. The coalition has presided over strong economic growth and successful entry into the single currency, but it appears tired and out of touch with the popular mood. Ominously, there is no obvious alternative to it that does not involve Haider.

One of only two major west European countries outside the EU, Switzerland has been governed by the same four party coialition, one member of which is the Social Democratic Party (SPS/PSS), since 1959. In last October’s general election, the SPS/PSS slightly increased its share of the vote but the real victor was the conservative SVP/UDC, whose vote increased 6 percentage points on its 1995 showing.

The least Eurosceptic of all the Nordic countries, Finland has been governed by a Social Democrat-led five-party rainbow coalition since 1995. In last March’s general election, the coalition parties had mixed results. The Social Democrats (SDP) slipped badly, but the former-communist-led left alliance, Vasemmistoliitto, kept its share of the vote and the centrist National Coalition Party (Kok) and the Greens increased theirs. Finland was in the middle of its presidential election as New Times went to press, with the SDP’s Tarja Halonen facing former prime minister, Esko Aho, of the opposition Centre Party (Kesk), in the second-round run-off.

The key question in Danish politics is whether to join the euro. Prime minister Poul Nyrup Rasmussen is keen to go in, and his Social Democratic Party, the dominant partner in the centre-left government, is likely to agree with him at its congress this autumn, in which case there will be a referendum on the issue late this year or early next.

Outside the EU since it rejected membership in a 1994 referendum, Norway has been governed since autumn 1997 by a bizarre minority coalition of Christian Democrats, liberals and Euro-sceptics. Most observers expected that the coalition would collapse sooner rather than later, clearing the way for the return of the Labour Party (DNA) to government. Instead, it has persevered, leaving Labour, which dominated the political scene in the late 1980s and early 1990s, in the political wilderness.

After winning nearly 20 per cent of the vote in the 1992 general election, the Labour Party, led by Dick Spring, played a pivotal role in Ireland’s governing coalitons of the mid-1990s – and then slumped to an ignominious 10 per cent in the 1997 election. It is currently in opposition to the centre-right coalition of Fianna Fail and the Progressive Democrats, which is basking in the warm glow of Ireland’s unprecedented economic growth since it came to power.

The centre-left Luxembourg Socialist Workers Party (LSAP/PSOL) has been out of power since last June’s general election in which it took a disappointing 24 per cent of the vote.

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