The recent swing to the left in France may indicate that 2012 could be a threshold year for the European political landscape.

Whoever wins the next election will have no choice but to trim our pension system and welfare state handouts while investing more in education- Michael Falzon

For years, most of Europe has been dominated by the centre right. The 1990s saw the European stock exchanges in an upward swing fed by a constant stream of mergers and acquisitions and the banks never had it so good.

The European capitalist model, having vanquished the communist Soviet empire, seemed to have no competitors in the new world scenario with only one superpower.

But something started to go wrong with the turn of the century, and by 2002 Europe was facing a strong economic downturn which has kept getting worse.

The past four years were an unending series of crises that hit the euro so consistently that its very continued existence was sometimes in doubt. A full crisis was averted only at the last moments as the EU tried to come to grips to stabilise its situation resulting from having a unified currency without a unified fiscal structure.

Unemployment has reached an all-time high in the EU but the end is not in sight – this prolonged economic crisis is now provoking a popular backlash against austerity.

Not all countries reacted in the same manner to this ‘stress test’ and one could say there was roughly a north-south divide. In the Mediterranean area where politics is quite a quaint art-form, the political class sought a temporary respite while the people took them to task.

The Germans, with their traditional fiscal discipline, were the first to get going and do what needed to be done, that is, live within their means.

The British, with their typical stoicism, also bit the bullet. They came up with a strange Conservative-Liberal coalition, and let the police do their job when the left took to the streets.

A notable northern exception was Iceland, once considered as a successfully rich non-EU microstate: it went under in an unprecedented financial storm, and started to negotiate its entry into the EU – a stance it once shunned.

The Irish, with some reluctance also had to bite the bullet.

The reaction in the south of Europe was different. For years, politicians have – to different extents – bribed their voters with an unsustainable welfare state and a bloated banking structure.

First it was Portugal and then it was Spain. Elections in both these countries resulted in a change of government.

In Italy, the political class ducked the problem and set up a ‘technocratic government` to do the dirty job that had to be done.

The worst case scenario was Greece. After years of political paternalism, hidden by cooked accounts and sheltering in the comfort of the eurozone, the truth about its national debt came to the fore.

After 70 per cent of this debt was written off and if it carries out the restructuring that Greece has promised to do, in 2025 its debt will still be twice the maximum indicated by the Maastricht Treaty.

The call for a referendum by the Greek Prime Minister to endorse the austerity measures that he had already accepted remains a hallmark of Greek political duplicity.

The latest in this veritable Greek tragedy is an election that has taken the country nowhere with Greeks wanting to stay in the eurozone without paying the price for the privilege.

The eurozone is definitely not out of the woods yet. The euro crisis is still with us and this is why the election result in France may be crucial for Europe.

France is the second half in the Franco-German partnership that drives Europe. With a coast on the Mediterranean and another on the Atlantic, it strides both the disciplined north and spendthrift south. It settles the balance in Europe and its move to the left should be an eye-opener to everybody.

If Germany and France continue to move together, the euro and Europe will continue to integrate, and national politics will become more local politics. The political classes will have to give up more of their power and Hollande’s pre-election stance becomes a dead letter. His idea that France can do away with austerity measures, and make up for this by increasing taxes, is a non-starter.

German Chancellor Angela Merkel will have a hard time to convince her French counterpart to behave in a fiscal disciplined manner but she has no other choice.

At the end of the day all this is the result of globalisation: with the rise of China, India, Brazil and Russia, Europe no longer calls the shots, and it needs to go through a phase of painful restructuring to compete and to live within its means.

While Malta’s small size makes it insignificant in all this, our country is no exception.

Whoever wins the next election will have no choice but to trim our pension system and welfare state handouts while investing more in education so that we can run as fast as our competitors.

In other words, the winner’s prize is likely to be a poisoned chalice.

micfal@maltanet.net