Published in Business Spectator (Melbourne), 29 May 2014

If markets are anything to go by, last weekend’s elections to the European Parliament delivered a good outcome, promising stability and predictability for the continent. Across Europe, stock indices soared on Monday: up 3.4 per cent in Italy, up 2 percent in Greece. In Germany, it only seems a matter of time until the DAX, already at an all-time high, climbs above the 10,000-point mark.

There is a palpable sense of relief that despite the fear that eurosceptic forces might take over Europe, the EU will remain more or less governable. As my favourite europhile economist, Berenberg Bank’s chief economist Holger Schmieding, wrote on his blog: “After four years of a wrenching ‘euro’ crisis, pro-European mainstream parties (centre-right, centre-left, liberals, Greens) will still have close to 70 per cent of the seats in the EU parliament. Although it will be more difficult to negotiate a trade deal with the US, European institutions can function well with that result.”

I have always admired my friend Holger’s unending optimism, and he is certainly right in a technical sense. But I am still puzzled how easy europhiles are to please these days.

In any country, a newly-elected parliament of which one third consisted of populists, nationalists, anti-Semites and semi-communists would be seen as a problematic result. In Europe, they are now apparently content that it did not get worse.

Mainstream political parties have also concluded that the results warrant a return to business as usual. Shortly after they had become known, the parties returned to their favourite pastime of haggling over jobs for their leading candidates, as if Europe had not just been struck by a major political earthquake.

In this case, I believe it is fair to say that both markets and mainstream parties prefer to look at the election results through rose-tinted glasses. What we have seen last weekend may leave the EU intact. There will be a functioning parliament able to do its job, and there will eventually also be a new president of the European Commission, maybe even one of the two lead candidates Martin Schulz and Jean-Claude Juncker. It might take weeks until we know who it will be, since none of them commands a parliamentary majority.

Everything else in Europe, however, is more complicated than ever before. This time, the problem is not so much at the EU level but at the level of the member states. It is their individual political systems that have been thrown into chaos, rather than the European Union, to which they belong. The results will be felt for years, and unfortunately they will make good policy making less likely.

Despite the startling result of the United Kingdom Independence Party, its current success may well turn out to be the most short-lived. Under Britain’s first-past-the-post electoral system, UKIP will struggle to win even a single MP at next year’s general elections unless Prime Minister David Cameron forges a deal of sorts with his right-wing rival. UKIP’s main effect on domestic politics would then be to prevent a Tory victory and pave the way to a Labour government. However, that was already looking likely before the European elections, so the mid-term implications of Britain’s vote could be limited.

The story is entirely different in France, not only because the Front National is a far more extreme political force, bordering on right-extremism. Although it is highly unlikely that the FN could repeat its result in a national parliamentary or presidential election, its showing on Sunday has dealt an almost fatal blow to President François Hollande. His political authority is gone after scoring a disastrous 14 per cent, and his recently appointed Prime Minister Manuel Valls already appears damaged. Unfortunately, Hollande still has three years to go but he can no longer effectively lead his country out of its economic malaise.

Italy and Greece also recorded strong showings of anti-reformist parties. Driven by the protest against austerity, Greece’s radical left party Syriza, under its charismatic leader Alexis Tsipras, became the country’s strongest party. Unsurprisingly, he called for early national elections on Sunday. This will not happen, but an eventual Syriza government no longer looks like a remote possibility.

Similarly, in Italy, Prime Minister Matteo Renzi’s PD may have won an astonishing 41 per cent of the vote — the single biggest share for any one party in decades. But the combined share of the three strongest eurosceptic parties (Movimento 5 Stelle, Forza Italia and Lega Nord) is stronger still at 44 per cent. It does not quite appear to be a resounding vote for austerity measures and economic reforms. Besides, Prime Minister Matteo Renzi is trying to move away from austerity as well.

Even in Germany, the political landscape has changed quite significantly after the European elections. The smallish Free Democrats, for most of post-War history the kingmaker in German politics, has been decimated and relegated to a fringe party. Its place could now be taken by the Alternative für Deutschland, a eurosceptic conservative party. If it happens, Chancellor Angela Merkel would have to change her stance on European bailouts if she does not want to see her party bled out on the right.

By all accounts, these European elections have shaken political landscapes in many countries. Over the coming years, we will find out what these developments will mean in practice. However, the fragile consensus that hitherto governed Europe — closer integration and bailouts against austerity promises — will be hard to maintain.

As disturbing as some of these results may be, the elections also produced some comical moments. For example, the Italo-German editor-in-chief of German weekly Die Zeit boasted on primetime TV that he had dutifully voted in both Germany and Italy. He will now face charges of electoral fraud and a possible five-year jail sentence since dual citizens have to choose in which country they cast their vote.

An even more entertaining result, also from Germany, is the election of a single MP from the list of the party Die Partei (The Party). Led by satirist Martin Sonneborn, the party campaigned on issues such as a minimum wage of 1 million euros and argued that fare-dodging needed to remain affordable. Now it wants to send a new MP to parliament every month, let them have a good time in Brussels at taxpayers’ expense and then pass on to the next person on the list. “We want to milk the EU like a small Southern European country,” Sonneborn proclaimed.

The EU elections may have been hopeless in parts. But at least they were not always serious.