Oct. 18 (Bloomberg) -- Italian Prime Minister Enrico Letta said he commiserated with Barack Obama about the debt-ceiling standoff and told the U.S. president that Europe may be about to have a Tea Party problem of its own.
Elections for the European Parliament in May will be contested by “populist parties” resembling the small-government branch of the Republican Party that threatened to trigger a U.S. default, Letta said late yesterday in Washington after meeting Obama at the White House.
“I reacted to everything Obama told me by telling him all of the difficulties that we’ll have in Europe in May,” Letta said to reporters. “The message from the U.S. is problems don’t get resolved if you follow the Tea Party’s logic, you just have more problems created. It’s a message I definitely endorse.”
Europe’s established parties are bracing for a challenge in May from upstart, euro-skeptic movements from France to Italy to the U.K. Incumbents are facing public wrath as the economic slump erodes wealth and accentuates differences in things like unemployment rates within the European Union and the 17-nation euro bloc.
Marine Le Pen’s National Front, which wants France to limit immigration and withdraw from the euro, won a local by-election on Oct. 13. In Italy, Beppe Grillo’s Five Star Movement garnered a quarter of the votes in a general election in February. Gains by U.K. Independence Party leader Nigel Farage prompted European Commission President Jose Barroso to warn that the anti-EU group could be the country’s biggest force after the May vote. UKIP wants Britain to quit the EU.
“We have seen that, outside of Germany, most of the mainstream parties are suffering,” Marc Ostwald, a strategist at Monument Securities Ltd. in London, said in a phone interview. “There is not a shadow of a doubt that some of the more extremist parties are doing very well.”
The backlash against the EU contrasts with a message from EU leaders that the sovereign debt crisis battle has been won. Mario Monti, who preceded Letta as Italian premier, called attention to the issue in September 2012 after debt-market speculation had started to abate, saying the anti-EU sentiment cropping up was “paradoxical and sad.”
Italian 10-year bond yields were little changed at 4.2 percent at 12:20 p.m. in Rome. That’s down from more than 7 percent in late 2011, thanks in part to budget rigor and European Central Bank President Mario Draghi’s promise in July 2012 to do whatever it takes to save the euro.
Obama thwarted the Tea Party this week by getting an increase in the debt ceiling from a Republican-controlled House of Representatives without giving in to demands. The defeat exposed the Tea Party to criticism by factions from within the Republican Party, including the group’s business lobby.
“Europe’s populists are far worse than the Tea Party,” Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, said in an e-mailed reply to questions. “They have no coherent or ideological view on what they want to do with the economy.”
Letta, 47, is a career politician who represents Italy’s labor union-backed Democratic Party. He was appointed in April after two months of gridlock in a fractious parliament, becoming the country’s second prime minister in a row without an election victory to his credit. Monti, 70, was head of Milan’s Bocconi University when he was appointed premier in November 2011.
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