Within countries, local nationalisms are taking hold, with richer regions demanding to pay less to their poorer neighbours
On the surface, the eurozone crisis appears to be all about the fallout between national governments. It is creditor v debtor, north v south. At the last EU summit, the standoff between Germany and Spain seemed to epitomise that divide.
But there is another, under-reported story here. It's less about nation states than about regions within European countries being pulled apart through internal north-south conflicts. In Italy, prime minister Mario Monti has talked up his "grave concerns" about the default of Sicily, which the Fitch ratings agency believes is not "imminent". Monti's statement is part of an internal political attack on regional spending and the size of the government payroll in the mezzogiorno, the Italian south.
There are already growing regional wealth disparities within all the high-income countries of Europe. Now they are being driven apart further by the new problem of declining ex-industrial regions, such as the West Midlands in the UK or Walloon Belgium. Some countries are still struggling with the old problem of their laggard agricultural regions, such as Puglia or indeed Sicily in Italy.
Research shows that, on some measures, the internal inequalities are greater in northern countries such as the UK than in southern countries such as Italy. If one looks at GDP per head for the most affluent region with more than 10% of the population (London, including outer London, in the UK, and Lombardia, including Milan, in Italy), the top to bottom inequality is worse in the UK. In Italy the poorest regions, such as Calabria and Campania, have half the income of top regions, while UK regions such as Merseyside or south Yorkshire, do relatively worse. And 63% of the Italian population attain the mean national GDP or better, compared with 32% in the UK. These inequalities are growing, despite substantial internal transfers, and are driving the rise of a new regional nationalism all over Europe.
Countries in Europe have always been unhappy in their own way. What's new is that it is no longer the poorer regions who ask for more, but the richer regions who demand to pay less. This "can pay, but won't pay" politics was invented in two wealthy regions, Padania in northern Italy, and Flanders in Belgium. Insurgent populist parties Lega Nord in Italy and Vlaams Belang in Belgium mix regional identity politics with electoral opportunism. But their economic agenda is consistently against metropolitan political elites, and against redistributive tax policies.
As austerity bites, internal distributive conflicts are now spilling over into mainstream politics, especially in federal countries such as Spain, where 17 regional governments manage schools and hospitals and account for more than half of public expenditure. In January this year the centre-right Spanish government made an €8bn advance so that the regional governments could carry on paying their bills; by April, prime minister Mariano Rajoy was threatening to seize budgetary control of recalcitrant regions that were now being told to halve their deficits.
There are echoes of this tension even in Germany, where the regionally based centre-right Christian Social Union party (CSU) in affluent Bavaria is learning the new rhetoric. German politics is about coalitions and consensus, which has encouraged external scapegoating of the Greeks. That same tendency has, in the past, discouraged any questioning of internal distribution to the formerly communist east: an issue that is now being raised noisily by the leader of the CSU, who challenges the legality of internal "solidarity transfers" that supposedly cost Bavaria €7bn a year.
Britain looks out of step with the trend towards regional nationalism. But that may only be because our own populist right (UKIP and the Tory back benches) is fixated on repatriating powers from Brussels, while coalition expenditure cuts are already stripping out public employment and welfare benefits and thereby undermining New Labour's de facto regional policy. But if the Treasury presses for another £10bn in welfare cuts, how long will it be before an ambitious Tory populist, maybe someone like Boris Johnson, starts to make speeches about feckless Geordies?
The emerging pattern of the new regional nationalism is profoundly depressing if we set it in a broad historical perspective. Right across western Europe, one postwar legacy of the economically catastrophic 1930s was a reinvention of the nation through social settlements, underpinned by new policies of economic management, regional aid and social welfare (which in the UK meant Keynes plus Barlow plus Beveridge).
Now what remains of those settlements is being attacked by a new regional nationalism of the privileged, often in alliance with the central state. We must begin to understand that governments are not just sites where regional problems are solved, but also where they can be created or aggravated from the centre.
This then sets the nationalism of peripheral regions in a new context where again the UK has been slow to catch up with emerging realities. The old framing of the issue is about whether any peripheral region has the cultural identity and economic strength to benefit by cutting loose; and in the UK that makes regional government and devolution mainly a Scottish issue, divisively tied to the electoral fortunes of a nationalist party.
But the aggressive final dismantling of the postwar settlement in the UK (and elsewhere) reframes the issue. It should put regional nationalism on to a new agenda about defensive options for all centre-left parties in the economically weaker regions. The Scots will rehearse old arguments in their upcoming referendum, but it is time for a new argument from Wales, Northern Ireland and English regions such as the north-east and the West Midlands.
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