Euro Zone Crisis
The euro zone crisis was triggered in 2009 when Greece's debts, left by its previous government, reached a record 300 billion euros, leaving the southern European economy with debt levels more than four times higher as a proportion of gross domestic product than the official euro zone cap of 60 per cent of GDP. Since the original problems were uncovered, Greece has been bailed out twice, and lenders have also had to rescue Ireland and Portugal. In the latter half of 2012. Cyprus also required a bailout.
Europe’s populist backlash
European elections saw anti-establishment parties make great strides, underlining voters' disillusionment after years of economic crisis
The strong showing of populist and anti-establishment parties in last weekend's European Parliament elections had been on the cards for some time.
Staged every five years, the elections this year were a gift to the assortment of extremist, nationalist and anti-austerity parties, which - in addition to capitalising on growing popular disenchantment with the policies and priorities of the European Union (EU) - benefited from the political fallout from the four-year-old euro-zone crisis.
These were Europe's "crisis" elections - and the populist backlash is plain for all to see.
Anti-establishment parties captured a startling 30 per cent of the vote across the EU. In France and Britain, the EU's second- and third-largest economies, Marine Le Pen's far-right National Front (FN) and Nigel Farage's UK Independence Party (UKIP) even came first, humiliating the two countries' mainstream parties - in particular, French President Francois Hollande's ruling Socialists.
In Greece, the far-left Syriza party, which opposes the country's international rescue programme, secured the largest share of the vote, while nearly 10 per cent of voters backed Golden Dawn, a neo-Nazi party.
Even in Spain, where anti-establishment parties have only made limited inroads despite the severity of the country's financial crisis, a new anti-capitalist party, Podemos, which didn't even exist 12 weeks ago, managed to win 8 per cent of the vote.
Make no mistake about it, the results of this year's European elections throw the scale of popular disillusionment with the EU into sharp relief and severely undermine national governments' authority.
So what are the implications of this populist surge, particularly when it comes to plans for further European integration, which is deemed essential in order for the governance of the ill-managed euro zone to be put on a firmer footing?
First, one should bear in mind that the turnout in the elections was just 43 per cent - on par with 2009 and down from nearly 60 per cent in the 1980s.
While anti-establishment parties performed strongly, pro-EU centrist ones still hold some 70 per cent of the seats in the European Parliament.
Indeed, the anti-establishment parties are a disparate bunch, which is likely to diminish their influence in the parliament further.
Second, it is noteworthy that in Italy, which along with France is the "sick man of Europe", Prime Minister Matteo Renzi's centre-left Democratic Party soundly defeated the anti-establishment Five Star Movement on a respectable 60 per cent turnout.
That even increasingly eurosceptic voters in one of the southern European countries hardest hit by the crisis cast most of their votes for the business-friendly Renzi shows that mainstream parties with convincing reform programmes are still able to perform well in elections.
However, the triumph of the FN in France is a severe blow to the European integrationists, to say nothing about Hollande's government, whose fiscal and structural economic reform programme is now hanging by a thread.
The scale of the FN's victory - it won a quarter of the vote, compared with just 14 per cent for Hollande's Socialists - reveals a growing antipathy towards the EU in a country that has long been mistrustful of plans for deeper integration.
The euro-zone crisis, in particular the austerity-led policies that Germany, the EU's largest economy and its chief paymaster, insists must be implemented, played into the hands of the FN.
The Franco-German engine of European integration has been sputtering for some time. It may now be broken beyond repair.
Given that the underlying problems of Europe's monetary union can only be resolved by establishing a more secure political and fiscal union, the message from this year's European elections is an alarming one: there is less and less support for further integration.
This makes the muted reaction of financial markets to the elections somewhat perplexing.
Investors continue to take their cue from the actions of the European Central Bank (ECB), which is expected to announce monetary easing measures next week to ward off the threat of deflation in the euro zone.
Yet not only is there scope for disappointment given that the ECB is very unlikely to wield its "big bazooka" - full-blown quantitative easing (QE), which would be the most effective in spurring inflation - it is now clearer than ever that the ECB is the only game in town.
Should market conditions towards the euro zone deteriorate sharply again, the ECB will no longer be able to count on Europe's politicians to push ahead with further political and economic integration.
The European elections have raised the stakes for the euro zone significantly.
Much will hinge on what happens in France in the coming months.
The country already faces the worst of both worlds: no growth and no meaningful reform.
Now Hollande's government has another big problem on its hands: an increasingly popular FN.
Nicholas Spiro is the managing director of Spiro Sovereign Strategy