Political 'outsiders' gain strength in Europe

Following on from John Addis's blog yesterday about the looming battle over Greek debt – and what it might mean for Australian investors – I came across an interesting analysis of the European political situation by David McWilliams (via UK investor Neil Woodford's blog).

McWilliams argues that new political parties all across Europe – whether nominally from the right or the left – are all populist parties, representing people who feel like outsiders to the economic and political decision-making process.

The Insiders used to running the show are from big business, the public service and trade unions, while the Outsiders are the 'self-employed small business person, the contract worker, the immigrant, the unemployed and, of course, the young'.

'When there is economic growth,' explains McWilliams, 'the Insiders can buy off the Outsiders with crumbs from the table. There is a little bit for everyone because the pie is getting bigger each year and the system works. However, when growth stops, it's a different story. For the Insiders to preserve their position, it means the Outsiders must lose and this is when the game moves from being a well disguised process of 'beggar my neighbour' to an existential scrap between Insiders and Outsiders.'

The Outsiders rarely speak with one voice, but the severity of their plight is beginning to encourage them to do so, and they're naturally doing it through 'unconventional parties who mix the rhetoric of the excluded with the tribal comfort blanket of the nation; who offer the elixir of low taxes, with the promise of economic growth'.

Examples include 'the Front National in France that wants France to leave the Euro; UKIP in the UK that wants Britain to leave the EU and the Scottish Nationalists who want Scotland to leave Britain. In Spain, we have the left wing Podemos looking for debt forgiveness, Syriza in Greece wants Germany to pay, Sinn Fein in Ireland wants a bit of both'.

Silvio Berlusconi's Forza Italia can be added to that list and it's expected to play a key roll in Italian presidential elections over the weekend. France will then go to the polls in March, with Finland (where the True Finns have been gaining ground) and the UK following in April and May.

The existential scrap looks set to intensify if the Outsiders take heart from Syriza's success in Greece.