Hey, everybody. Peter Zeihan here. Coming to you from Florida. sorry. No beach scene today. I’m kind of in a bit of a hurry, but a lot of people have written in expressing an interest in what’s going on in European elections and since that happened. So I figured I would cover a little bit of that today. the short version is that we’ve got this thing called the European Parliament, which technically is the legislative arm of the European Union, and they have elections every few years.

They just completed them and in Italy, Germany and France, the hard right, racked up significant gains, significantly higher in France, in Germany than the ruling party did. and so the question, of course, is this, a game changer? Let’s start with the Germans. the German government under Schultz is a three party coalition that is very weak because the three parties agree on very little.

So whenever something happens in Europe, the three parties have to get together and have a coalition meeting to hammer out a common position before they start bringing in discussions with other countries. So it’s a long, laborious process. It’s really tedious. And because the coalition is so weak and because the chancellor of Germany, Olaf Schultz, is a weak leader, Germany has basically vanished from being a significant player in most European affairs.

or at least not not very much of a leader like it used to be. in the case of Italy, you’ve got a government, led by, Meloni, who actually is of the hard right. If you want to use a term that some people find is a little bit weird. and so when her party did, well, everyone’s like, oh, she’s the up and coming leader, and there’s might be something to that.

And then third, you’ve got France, which as always is a special case. in France again, the leaving party under President Macron, excuse me, did very poorly. And it was the National Front, which is kind of a traditional rightist party that did very well. Macron took this as kind of a personal insult to his view of everything and called snap elections in France.

So France will now have full parliamentary elections, in order to figure out, who’s been around the country. now, there’s a lot of if ends and buts that go with this, this. But basically France is going to have elections less than two weeks after the European parliamentary elections results, which is not a lot of time to get them to be shaped up.

the criticism that a lot of folks have is that Macron is, a little arrogant, like he’s a French president. Of course he’s a little arrogant. That’s not a reasonable criticism. Certainly it’s nothing new. and so what is in play here? Well, we’ve got, kind of two things you need to keep in mind. First of all, the European Parliament is not all that.

It, basically is only responsible for one thing. And that is saying whether or not the European Commission, which is the kind of the executive arm of the EU, is allowed to stand, they can, vote it down if a new one is formed. Like we will be seen here in a few months. they can say no, we reject the slate of commissioners, and that’s really all the power they’ve got.

So don’t read this for more than it is, because it’s not a huge deal in that respect. The European Parliament is not what makes the decisions in Europe. That is the Council of Ministers, which is the group of prime ministers and presidents that all countries directly, basically they work by either unanimity or something called qualified majority voting from time to time in order to decide what happens at the European level.

So what you normally happens is you have a European Union election, the EPP European Parliament that goes one way and then everyone takes a breather and then we get back to politics as normal, where the far right doesn’t do nearly as well. Now, what Macron is doing is betting that that is still the case, and he can take the political wind out of the sails of what was basically a protest vote in a very short period of time.

not in the least like nine things behind anyway. So he’s betting that history is on his side on this one. And, you know, we’re going to find out real soon in just a few days. Okay. Second, Macron’s personal leadership is not on the docket here. It’s not on the chopping block. It’s not at risk in any way, because the political system of France is significantly different from the one in Germany or in the United States.

So here you vote for the president in Germany, you vote for party here. The president controls foreign economic policy in Germany, you vote for the party. You get coalitions within their parliament, the Bundestag, and that coalition decides who the prime minister is. So you have a singular leader in both places who makes most of the decisions for Cabinet Office.

Not how it works in France and France, it’s split. So the Parliament selects the Prime minister and they are responsible for domestic affairs. But there’s a separate set of elections for the presidency. And that’s when Macron has been elected independently. So let’s assume for the moment the Macron was right. Well then the far right will be shown to be a flash in the pan and they go back to old politics.

Let’s assume for the moment that Macron is wrong. And these snap elections that he’s called go the other way. Well then the government falls. We get a new prime minister. But Macron is still president. And in that scenario, we’ve got something called cohabitation, which basically means that not everybody agrees in France, you know, whoop de. So I don’t want to make this up for more than it is.

And even in the worst case scenario for the Macron government, you basically would have a split prerogative. The real issue where this may matter is going to be a national election, possibly in Germany later, but that’s going to be three years away. Unless, of course, the government falls. And then we have a different problem.

Hey everybody. Peter Zeihan here. Coming to you from Italy on the Via della Costa. Excuse me. The old Roman road that went all the way to Spain. since I’m leaving the country tomorrow. Today we’re going to talk about European politics. you guys may have noticed that we have far right parties which, based on which country or you know what your politics are either anywhere from conservative to moderate to Nazi, you know, taking power or at least doing very well in any number of electoral competitions in the European Space. 

in some cases seizing outright power. here, among others, in Italy. there are a couple of reasons for this. The first one is almost boring and statistical. It’s because there’s a different electoral system, a different approach in Europe. when the United States recovered from the Civil War and when the US was created in the first place, there is this idea that how you force modernity or how you force moderation is by forcing political groups to appeal to the largest number of individuals possible. 

So the United States has something called a first past the post electoral system with single member districts, which is a fancy way of saying that you vote for a specific person who’s going to represent a specific group of people. that’s not how it works in Europe. In Europe, most of the electoral systems were designed in the aftermath of the World wars, in the aftermath of a series of revolutions and conflicts that killed millions of people. 

And so it was perceived as far more important to, instead of catering to the, the vast majority, to have a society that was more inclusive of everybody. So instead of voting for a person, you vote for a party. And if that party gets 20% of the votes, they get 20% of the seats in parliament. And whoever has the most seats in Parliament then goes on to form the government. 

and in doing this, you allow groups that are maybe not in the center, but can still get a lot of votes to be part of the governing system. And so most countries in Europe don’t have two parties. They’ve got four or 5 or 6 or 8 or 12 or whatever. It happens to be. And so you get a lot more diversity in the decision making system. 

A lot more diversity in the politics of the parties that make up the system. And that means you need people from the extremes as well, anywhere from socialists and communists on the left to reactionaries and maybe even few neo Nazis on the right. That’s by design. It’s not by accident. And so you’re always going to have this element of the election system, of the electoral system, of the voters who are willing to support candidates that other people might find a little distasteful. 

And sometimes they form a government because they’ve got enough support. Now, have the this one piece two shocker is more demographic. when you industrialize and urbanize, you start moving from the farm and into the city, and then the farm kids are free labor in the city. Kids are an expense. And so as time goes on, you have fewer of them. 

Well, a good portion of Europe didn’t get serious about the business of urbanization and industrialization until after World War two. So whereas the Germans and the Brits kind of led the way in that process, and the birth rate has been dropping fairly slowly for a long period of time in places like Spain and Italy. The process really didn’t start into the latter half of last century, and has proceeded and a much, much, much, much faster rate. 

Well, if you’ve got a birth rate that is less than two children per women for a decade or two, it’s not a big deal. But if you do that for, say, 7 or 8 decades, all of a sudden you’ve got a problem. And the issue we have in a lot of Europe is that they drop below replacement as far back as the 50s and the 60s, and they drop past 1.5 children per woman as far back as the 70s, in the 80s. 

And you play that for another 50 years. And it’s not so much that, population reconstitution is impossible. It’s been impossible for decades. But now, at the point that the last people who were born in normal times are now turning 60 and 70. And nowhere is that more advanced than here in Italy. So it’s not that demographics, when they turn, generate a more conservative population. 

It’s that when people retire, they get a little crotchety. And we’re now seeing people across Europe in vast numbers age past that point, and they didn’t have enough children to generate a more economically pragmatic population. And since those people don’t exist, there was not another generation born below to be more liberal. So if you remove the liberality of the youth and the moderation of the middle age folks and all, you’re left with crotchety crunchiness, you get more reactionary politics, electoral systems and ultimately governments. 

It’s furthest along here in Italy. Coming up a close second is Germany, and I’m sure there’s no one worried about that. And after that, you’ve got places like Portugal, Austria, the Netherlands and Poland which are adding to this and a similar rate, but from a slightly younger base. So we are going to see more and more conservative politics, more and more socially conservative politics, more and more populist politics. 

Moving on. Because if you are, turning 70 this year, you’re really not concerned of how things like social rights or economic development, you want your train ticket to be a half a euro and no more. Oh, yeah, that reminds me. Having something like the common currency requires a more balanced economic system. And if you look back demographically at the period we’ve been in the post-Cold War period, we’ve gone through a couple interesting phases because from roughly 1990 until roughly 2015, we saw these people aging, but no one had really hit retirement yet, which meant they hadn’t become interested in no change yet. 

In fact, if you’ve got people who are age 50 to 65 and who don’t have kids, their income is huge. You’re saving loads of money for retirement, the tax base is massive, and the financial wiggle room in that sort of system is absolutely huge. And that’s the same era when the Europeans decided that, hey, let’s do the common currency. 

And if you think back at how insane that sounded at the time, you have industrialized Germany, you’ve got technocratic Luxembourg, you’ve got post industrial Portugal. It’s based entirely on tourism. Who would ever think in a normal system that all of those systems could be under the same currency union? But when there is a huge amount of, financial are just floating around because of all these middle age, not yet retired people, you could try a lot of things. 

And they did. One outcome was the common currency. But now a lot of the people who were generating all that capital to give them wiggle room have moved into mass retirement. And with them, the hopes for the currency go as well. and for those of you who are finance nerds out there, you think the Germans were obsessed with inflation before most of their working age population retired? 

 Just wait till they’re all retirees, because that is something that happens within the next ten years. When that goes down, there isn’t much hope for the euro. So, you know, this is why you can make the most of it. And I’ll see you on the other side of the pond. Take care.