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Opinion

Europe's debt crisis: Five ways it's been put to good use

Europe's debt crisis has roiled financial markets and populations. But beyond nationwide strikes and gyrating markets, Europe has put its crisis to good use. Here are five trends that will ultimately strengthen the European Union and the euro currency.

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Today's crisis will thus provide crucial impetus for addressing Europe's long-term demographic and economic challenges.

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4. Leftist parties move to center

The debt crisis has also dramatically shifted the political orientation of center-left parties across the European periphery. This mirrors the "New Labour" shift to the center, steered by Tony Blair in Britain in the mid-1990s, and before that in the social-democratic parties in Germany, the Netherlands, and Scandinavia.

Traditional socialist parties in Southern EuropePASOK in Greece or the Socialists in Spain and Portugal – are today espousing a far more limited and sustainable vision of the welfare state than before the crisis.

Political differences will of course remain, but the earlier experience from Northern Europe suggests that the centrist shift is a lasting political realignment that facilitates broad national consensus for sustainable fiscal and economic policies.

5. Populism is less popular

Importantly, voters in crisis countries are emphatically rejecting domestic economic populism at the ballot box, and instead are accepting welfare reforms and cutbacks on a scale previously considered likely to trigger revolutions.

Certainly, Europe has seen its share of violent street protests in recent years. Smaller populist parties have emerged in several countries, such as Finland and the Netherlands. Yet these have proved unrepresentative of general public opinion in Europe.

For instance, when Ireland and Portugal went to the polls in 2011, pro-reform parties supportive of IMF austerity programs won and formed new national majority governments.

And in every national election in the EU since 2008, the most fiscally conservative platform has carried the day. This is certainly no coincidence, as Europe's crisis has been severe enough to convince even risk-averse electorates to choose market-oriented orthodoxy over simplistic firebrands.

Certainly, Europe still has far to go, but it has put its crisis to good use.

Jacob Funk Kirkegaard is a research fellow at the Peter G. Peterson Institute For International Economics.

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