The far-wrong: European populists are gaining support by moderating their economic agenda

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In recent years, European economies have seen tough times. Due to several energy crises linked to supplies from Russia, EU residents have faced higher inflation, increased refinancing rates, and slowing economic growth. The EU’s GDP grew by only 1.1% last year — and even that was an improvement on the 0.4% figure from 2023. The European Commission does not expect significant improvement and forecasts that growth will remain around the same level in 2025, increasing to 1.5% in 2026.

A year ago, former European Central Bank (ECB) head Mario Draghi, who once saved Europe from a debt crisis, presented his plan for reforming the bloc. But none of those proposals have been implemented. Additional problems have come from abroad, with Donald Trump launching a trade war and Vladimir Putin continuing his war in neighboring Ukraine. Yet internal political crises have caused almost as much disruption. For example, the dissolution of the French government in September drove the yield on the country’s thirty-year bonds down to 2008 levels.

Still, the general concerns that Draghi identified have not yet produced an acute crisis anywhere in the union. “There are currently no European countries in a situation so catastrophic that radical reforms are required,” notes Konstantin Sonin, a professor of economics at the University of Chicago. Indeed, in historical terms, Europe’s current slow growth is not extraordinary, and several Eastern European countries are still showing decent GDP and income growth.

However, the wave of inflation that recently swept through Europe has hit the least well-off segments of the population particularly hard — and it is their support that now underpins the popularity of far-right forces. These parties poll disturbingly well in France and Germany, and in the Netherlands they briefly headed a governing coalition. The paradox is that even before coming to power, far-right movements often have a negative impact on the economy: moderate politicians, faced with such opposition, often fear adopting painful-but-necessary reforms that are sure to cause short-term political pain while promoting long-term economic gain.

Meloni’s trauma saves Italy

In her youth, Italian Prime Minister Giorgia Meloni infamously called Benito Mussolini “a good politician” and expressed non-judgmental views on fascism. But today she can hardly be classified as far-right — her government hands down long prison terms to extremists and prosecutes those performing “Roman salutes.”

Meloni’s economic policy is also far from far-right. Over the past three years, her government has been gradually reducing the country’s budget deficit. Back in 2023, the authorities allocated tens of billions of euros to support businesses and households during the energy crisis. And in 2024, Meloni cut income tax rates for the middle class. Combined with low healthcare spending, this prompted trade unions to organize mass protests. Still, Italy expects to bring its budget deficit into compliance with EU rules by the end of 2025 — a year earlier than previously planned.

Meloni is fighting the deficit to rein in Italy’s massive public debt, which stands at 137% of GDP. The IMF classifies this as a “moderate” fiscal risk. However, that assessment is based on mitigating factors such as the ECB’s ability to intervene and the market’s confidence that the EU is monitoring the debt and will not allow it to spiral out of control — this according to Lukas Guttenberg, senior advisor at the Bertelsmann Stiftung, and Nils Redeker, deputy director of the Jacques Delors Centre.

For Meloni, avoiding an increase in public debt and not alarming investors are key priorities, according to people familiar with her thinking. The debt crisis that brought down her political mentor, Silvio Berlusconi, remains such a painful memory for the sitting PM that it continues to influence all of her decisions. As a result, Italy lags behind other NATO members when it comes to increasing spending on defense and security.

“Lazy” Greeks and the six-day workweek

In Greece, which is still recovering from the 2015 debt crisis, a six-day workweek was introduced in 2024. This came under the government of Kyriakos Mitsotakis, leader of the right-liberal New Democracy party. His cabinet believes this is one of the most effective ways to address labor shortages, as about 500,000 people have left the country since 2009.

Previously, Greece had a 40-hour workweek, but it has now been extended to 48 hours. Workers may still choose a five-day schedule, but with additional hours on weekdays. Employees are paid a 40% bonus for working on Saturdays, and 115% for Sundays and holidays. Despite these measures, trade unions have already criticized the reform, and people have taken to the streets.

“When almost all other civilized countries are introducing a four-day workweek, Greece has decided to go in the opposite direction,” said Akis Sotiropoulos, a member of the executive committee of the Adedy public sector union. “In reality, this decision was made by a government ideologically focused on securing greater profits for capital.”

Other critics of the reform argue that it will effectively bury the five-day workweek, as the lack of government oversight in workplaces will allow employers to impose the more profitable six-day schedule.

Migrants divide the Netherlands

In early June, the Dutch government collapsed after the leader of the far-right Party for Freedom, Geert Wilders, withdrew from the ruling coalition. The reason was a dispute over migration policy.

Wilders proposed a plan for a drastic reduction in immigration that included deploying the army to ensure security and patrol the borders. He also suggested sending all asylum seekers back to the border and closing refugee accommodation centers.

“All Syrian refugees must be sent home immediately,” insisted Wilders. He demanded that the EU asylum quota system be suspended and that family members be banned from joining refugees already in the country. Some of these proposals violate European human rights laws and the UN Refugee Convention, which the Netherlands has signed. But Wilders warned that if his initiatives were not adopted, the largest party in parliament (37 out of 150 seats) would leave the cabinet.

Following this, independent Prime Minister Dick Schoof submitted his resignation to the king and requested the dissolution of the cabinet. “We have concluded that this government no longer has sufficient support,” Schoof told reporters in The Hague after an emergency cabinet meeting, adding that he considered Wilders’s decision “irresponsible and unnecessary.”

Coalition partners reacted angrily to Wilders’s move. Particularly striking was the response of right-wing VVD party leader Dilan Yeşilgöz (her father is a left-wing activist from Turkey who emigrated to the Netherlands):

“We had a right-wing majority, and he’s throwing it all away for his own ego. He just does whatever he wants… He’s making fools of us. He’s walking away in a period of unprecedented uncertainty.”

As a result, new parliamentary elections to determine the formation of the next government are scheduled for October 29.

This did not have an immediate or direct impact on the country’s economy: the stock market showed no reaction, as perpetually unstable political conditions are nothing new. As Bert Colijn, chief economist at ING Group, noted: “the Dutch economy, labor market, and public finances are functioning properly.”

At the same time, the Netherlands can no longer carry out key reforms, nor can it increase defense spending to 5% of GDP (as required by NATO). The country currently spends just over 2% of GDP on the military and has pledged to raise that only to 2.2% by 2026.

Economic reforms are also still being hampered by last year’s resignation of State Secretary for Customs and Welfare Nora Achabar, who was born in Morocco. She quit her post after hearing racist remarks in the government about migrants following a soccer match in Amsterdam that ended with assaults on fans from Israel. Wilders blamed the incident on Moroccans.

The country certainly needs economists: in 2023, labor productivity fell by 1.3% — one of the steepest declines in the past fifty years and the second largest since 2009. The Netherlands also slipped into a mild recession in 2023, with the economy contracting by 0.3% in the second quarter compared with the first. It is clear that with an unstable government, tackling such problems becomes much more difficult.

Up next: Germany and France

So far, the influence of the far right remains largely limited. However, the situation could change dramatically if they come to power in such pillars of the European economy as France and Germany. In both countries — and even in the United Kingdom, which has left the EU but remains close to the continent — far-right parties are now leading in some polls.

In France, Marine Le Pen’s National Rally enjoys the support of 36% of voters, far ahead of other political forces. In Germany, Alternative for Germany (AfD) has in recent months caught up in popularity with the ruling Christian Democratic Union (CDU), and in a recent Forsa poll even surpassed it. In Britain, Nigel Farage’s Reform UK party is outperforming both the Tories and Labour.

Right-wing populists could come to power in all these countries if current governments fail to address migration issues and the rising cost of living, said Mujtaba Rahman, head of the consulting firm Eurasia, in an interview with The Wall Street Journal. The economic downturn, rising prices, and a growing number of migrants form a dangerous combination that has driven many voters away from traditional parties.

“By 2027 the hard right could be in office in economies worth [nearly] half of European GDP,” The Economist writes. “Hard-right success would lock in Europe’s least productive features: transfers to favored groups, protectionism, and hostility to competition.”

Far-right leaders’ fiscal extravagance would create even more problems. In addition, British journalists note, the far right’s unwillingness to compromise could undermine investors’ confidence in the European economy, since radicals are not known for flexibility, and EU leaders often have to coordinate their economic policies with one another.

Both Farage, Le Pen, and AfD leader Alice Weidel are essentially promising their voters the same thing: mass deportations of migrants. Farage, in particular, intends to revoke permanent residence permits for 800,000 “young and low-skilled” newcomers.

Le Pen, who often speaks about ethnic crime and riots, is in favor of adding the term “undesirable migrant” to France’s immigration law. Weidel plans to close borders, turn away people without documents, and launch a “re-emigration” process. AfD leaders also want to resume buying Russian gas and are in no hurry to condemn the war in Ukraine.

All this threatens the three leading European powers with the same consequences Britain faced after Brexit — namely, labor shortages in low-skilled and low-paid sectors such as trucking. As for crime, many countries today are instead moving toward legalizing even potentially risky “professions,” such as prostitution and the sale of soft drugs, as this makes oversight easier.

The far right also has projects unrelated to migration. For example, as early as 2017, Le Pen attracted French nationalists by promising to build more prisons, expand the police force, and increase military spending. The National Rally leader also proposed Frexit — leaving the European Union — which, once again, would likely bring France the same problems that Britain faced.

Her young successor as party head, Jordan Bardella, also proposes strengthening law enforcement. On economic issues, he advocates stimulating industry by lowering taxes on producers, incentivizing employers to boost wages, introducing a progressive pension system, suspending VAT taxes on one hundred essential goods, and addressing the low-skilled labor shortage (which would reduce the incentives for migrants to come to France).

Bardella also proposes tax and credit incentives aimed at increasing birth rates among the native population. On the external front, the far-right leader seeks tighter control over imports and support for domestic producers, for example by requiring cafeterias to use 80% locally produced agricultural goods in meal preparation.

The UK’s Farage, for his part, promises to exempt 7 million people — or one in ten Britons — from income tax. This would apply to those earning up to £20,000 per year and would leave workers with an extra £1,500 annually, according to the Reform UK leader. He also promises to cut the fuel excise duty by 20 pence per liter for both private and commercial users, abolish VAT on electricity bills, and eliminate the tourist tax, inheritance tax, and environmental levies. In addition, he wants to exempt more than 1.2 million small and medium-sized enterprises from corporate tax and reduce the main corporate rate for some companies from 25% to 20%, with future cuts reducing that figure to 15%. Farage is not willing to clarify how much revenue the country would lose or how all of these proposed reforms would affect the economy. Typically, he only cites general sums spent on migrants and hints that he will eliminate them entirely.

The plans of Germany’s AfD program are even less specific. For example, in 2017, under the section “Eliminating the Financial Vulnerability of Families,” the party vaguely promised to carry out a “deep reform” for the benefit of Germany, including in the area of social insurance.

The German far right also called for a review of the pension and tax systems to ensure that large families with low and middle incomes could enjoy a “standard of living above the minimum subsistence level” and receive pensions sufficient for a dignified old age. No concrete measures were mentioned. AfD hinted that it would financially incentivize those who choose “raising children over careers.” Essentially, this would create a society with fewer workers and more beneficiaries — at least until the children grow up and enter the workforce themselves.

By 2025, however, German far-right parties had become more technical and learned to write their proposals more precisely. Today, in addition to supporting the poor, they propose reducing VAT on food and beverages in the hospitality sector from 19% to 7%, abolishing all CO2 emission taxes, and eliminating property taxes. Regarding the latter, AfD promises full compensation to municipalities through surcharges on income and corporate taxes.

However, it is also stipulated that the size of this surcharge would depend on taxpayers’ economic capacity. At the same time, the far right proposes saving state money by cutting support for NGOs and contributions to common EU needs, moves that would almost certainly complicate relations with Brussels.

In this way, far-right parties promise to redirect funds currently allocated to migrants or general EU purposes toward their own citizens as part of an effort to secure electoral support. Yet it seems that the economic problems resulting from these measures are of little concern to them. Moreover, the amount of money required for such a simple form of voter inducement could exceed the savings from cutting benefits for newcomers.

On the other hand, some initiatives in far-right programs were clearly drafted by professional economists, and not all of these measures — tax cuts for small businesses, incentives for employers who raise wages — deserve condemnation. In addition to current imperfections in migration policy, this economic aspect, too, helps explain why support for radicals is growing.