Although it surprised almost no-one, German Chancellor Angela Merkel’s announcement on 20 November that she will again stand as the Chancellor-candidate for the conservative Christian Democratic Party/Christian Social Party Union (CDU/CSU) at next year’s German federal election will cause deep and heartfelt sighs of relief not only in Germany but throughout Europe.

The CDU has polled consistently in the low 30s since Chancellor Merkel’s decision last year to allow asylum seekers to be processed not in the first country of entry to the EU but in Germany—where most were headed anyway—resulting in well over a million people entering Germany. That’s well below the CDU/CSU’s result of nearly 42% at the 2013 federal election although the Chancellor’s personal popularity has remained solid, at about 50%.

The reason for this is that most Germans still see her as capable, sensible and reliable—an island in a sea of trouble. According to the most recent German polling, nearly 2 out of every 3 German voters (64%) warmly welcome her decision to stand again; fully 89% of the CDU/CSU’s own voters support her decision. And the CDU/CSU’s support among German voters has increased too, to 36%.

That’s still well below the CDU/CSU’s vote in 2013. But the lesson is clear: while Germans aren’t at all happy about the Chancellor’s policy on asylum seekers they want her as Chancellor.

She has consistently out-polled, as preferred Chancellor, any alternatives offered by her coalition partner, the Social Democratic Party (SPD). Under Deputy Chancellor Sigmar Gabriel the SPD’s support has fallen to levels (21% in the most recent polls) that call into question whether the party of Brandt and Schmidt still qualifies as a major party. The very popular SPD Foreign Minister, Frank-Walter Steinmeier, looks like becoming German President when the incumbent, Joachim Gauck, retires early next year, so he won’t be a contender.

There’s speculation that the current President of the European Parliament, Martin Schulz, might be drafted by the SPD to face Merkel. He’s announced that he will return to German politics, probably initially as Foreign Minister in the Grand Coalition. But Merkel would probably still have little trouble against him, if he stands as the SPD Chancellor candidate. And there’s simply no-one in her own CDU who’s considered a serious rival to her.

So Merkel is the best thing the CDU/CSU has going for it and there must be a good chance of the Union again becoming the largest party in next year’s election. It might again however have to form a Grand Coalition with the SPD. Even then, an overall majority will be hard to find and might require some creative coalition-building. It might, for example, come as a surprise in the Australian political context to hear that, following elections earlier this year, the conservative CDU is the junior coalition partner to the Greens in the German state of Baden-Württemberg, under a very popular Greens Premier.

There are however serious risks and a year is a very long time in politics. The biggest risk is that votes will be lost on the right, where the extremist and xenophobic Alternative for Germany (AfD) remains very popular among Germans worried about the world, Europe, asylum seekers and their jobs. The AfD is now represented in several state parliaments, is likely to enter others in the lead-up to the federal election, and is bound to enter the Bundestag too. It has consistently polled federally in the low teens (currently around 13%).

In the aftermath of Donald Trump’s win this should sound familiar. The same dynamics are at work in Germany, as they are elsewhere throughout Europe.

Being German Chancellor isn’t an easy job and it’s unlikely to get any easier. Whoever’s elected next year will need to address a range of huge problems confronting Germany and the EU, the Trump presidency and Brexit to name just two. And the European integration project, a cornerstone of German security policy since the end of World War 2, is looking sick.

The EU’s future might also take another hit, depending on the outcome of the pending French (and other) elections and the possible demise of Italian Prime Minister Renzi if his constitutional changes are rejected. In particular, the Italian referendum on 4 December could be a big problem for Merkel.  Matteo Renzi has said he will resign if he loses the referendum, which could have serious, wider repercussions in Europe.

It’s little wonder then that many Europeans, including many European governments, will be relieved that Merkel is standing again and should win, all else being equal. Germans aren’t alone in wanting to put their faith in the hands of Angela Merkel. Many rely on her to steer Europe through the chaos European countries are facing.

So Germany’s importance as Europe’s leader will simply continue to grow as will Chancellor Merkel’s central role as Europe’s strongest and most reliable leader. Germany’s voice on global strategic and economic issues is also becoming more influential.

Given all of this, Australia should be aiming to have the best and most substantive relationship possible with Germany and with its next Chancellor. This is also something the Germans want with us. They’ve chosen Australia as their key strategic partner in the Asia-Pacific region and we must keep working at this. The withdrawal of our closest partner, Britain, from the EU and the uncertainties associated with the Trump presidency have made developing this kind of relationship with Germany even more vital for Australia. We too should welcome Angela Merkel standing again as Chancellor.

British Prime Minister Theresa May once warned her fellow Conservatives of the perils of being known as the ‘nasty party.’ But after 100 days in office, she is in danger of going further, turning the United Kingdom into the nasty country.

In just a few months, May has launched attacks on “international elites” and decided to prioritise immigration controls over single-market access in negotiating the UK’s withdrawal from the European Union. At one point recently, companies faced the threat of being compelled to furnish a list of their foreign workers. And the 3.5 million European citizens who are settled in the UK were left to worry about whether May’s government would guarantee their residence rights.

It did not take long for the normalisation of nationalist rhetoric to affect the daily lives of Britain’s immigrant population. Indeed, hate crimes began to proliferate almost immediately after June’s Brexit referendum—even before May took power. Her government’s attitude seems to be a symptom, rather than a cause, of a broader nativist revival in Britain.

This revival has come on fairly quickly. As recently as the 2012 Olympic Games in London, the UK was showing a very different face to the world: welcoming, connected, and self-confident in its diversity. The current surge in identity politics seems to reflect a backlash against all that openness. In fact, Britain seems to be oscillating between inclusion and exclusion—and has been for four decades.

When Margaret Thatcher was Prime Minister in the 1980s, she promoted exclusion, defining British identity with reference to its enemies—and not just external foes, like the Soviet Union or the European Commission. There was no shortage of domestic villains: trade unions, miners, teachers, doctors, the BBC, ethnic minorities, the Scots, the Welsh, and Irish Catholics.

By the time John Major took over the premiership in 1990, there was a sense of national malaise, fueled by anguish about Europe and frustration with the declining prestige of British institutions. In 1995, opinion polls showed that only a minority of the country felt “British,” while many groups—namely young people, ethnic minorities, Londoners, Scots, and Welsh—felt poorly represented.

It was around that time that I, a precocious 23-year-old, became embroiled in the debate about national identity. In 1997, a few months after the election of Tony Blair and a few days after the death of Princess Diana, I wrote a report (PDF) arguing that, instead of mourning the death of the old narratives, we should celebrate the birth of new ones, reflecting pride in our past successes, while touting our creativity, diversity, and openness to business.

The point of my report, which was credited with spawning the political and media effort to rebrand the UK known as Cool Britannia, was to recognise Britain as a “silent revolutionary” that constantly renews itself, rather than basking in tradition. I was advocating a kind of progressive patriotism—one that was soon embraced by Britain’s political class, beginning with Blair himself.

To my surprise, when the Conservative Party started to renew itself under May’s predecessor, David Cameron, it focused on celebrating an inclusive national identity. Cameron and former London Mayor Boris Johnson, who now serves as foreign secretary, represented the modern, outward-looking, multiracial, multi-ethnic Britain that was broadcast to the world in the electrifying Olympic opening ceremony in 2012.

To be sure, within a couple of years, Cameron was calling for the Brexit referendum in a bid for votes, and Johnson was stepping up as a leader of the ‘Leave’ campaign. Nonetheless, they did not unravel the progress of the previous years.

A major opinion poll recently showed that almost a third of England’s people feel “very positive towards our multicultural society,” up from 24% in 2011. Meanwhile, the proportion of Britons who are most strongly hostile to immigration and a multicultural society has declined, from 13% to 8%. As The Economist’s Jeremy Cliffe argued in a 2015 paper, factors like rising racial diversity, a more educated citizenry, urbanisation, and increased variety in family structure seems to be giving rise to “an emerging cosmopolitan majority” in the UK.

As with any major social shift, diversity has its detractors. White, English, working-class men over the age of 55 feel particularly excluded from the progressive version of patriotism, and fear becoming a minority in their ‘own’ country. (According to data cited by Cliffe, the majority of the UK’s population will be non-white by 2070.) So they are revolting against cosmopolitanism—and May is playing to the crowd.

Some fear that this is the new normal. When May’s government first threatened to force companies to list foreign workers, I was dining with tech entrepreneurs from other EU countries who are settled in the UK. They joked darkly about being forced to wear blue stars on their clothes, speculating that the 1990s could one day be seen as an Anglo-Saxon version of Germany’s ill-fated Weimar period. That may be a stretch, but concerns that May’s decision to vacate the political centre could represent a long-term reversal of Britain’s political moderation are very real.

Fortunately, however, the long-term trend seems to be toward inclusion, even if the UK takes a couple of steps backward today. Even May herself, in her recent attack on cosmopolitanism, inadvertently celebrated Britain for precisely the achievements that its cosmopolitanism has enabled, from its outsize share of Nobel Prizes to the City of London’s financial clout.

Nonetheless, as the Brexit vote highlighted, Britain’s success is fragile. And the surge in hate crimes shows that the emerging cosmopolitan majority cannot simply sit back and wait for history to do its work. It must offer a new kind of politics that places a wedge between genuine fears and isolationism. It must show how Britain can reinvent its economy and state to deliver equitable growth, thereby regaining its agency in the world. And it must offer new ways to build solidarity and advance inclusion. Britain must not be allowed to become the nasty country.

It seems that practically no Western democracy nowadays is immune to right-wing populism. While populist rhetoric seems to be reaching fever pitch, with far-reaching consequences—most notably the United Kingdom’s vote to ‘Brexit’ the European Union—the reality is that the strain of nativism that it represents has long bedeviled democratic politics.

Populist movements tend to focus on blame. Father Charles Coughlin, the 1930s-era Roman Catholic priest from Detroit who promoted a fascist agenda for America, consistently sought to root out the culprits for society’s problems. Likewise, today’s right-wing populists have eagerly turned on the ‘establishment’ and the ‘elites.’

In Europe, this has meant blaming the EU for everything that goes wrong. Addressing the complex roots of current economic and social challenges—the UK and France, for example, suffer substantially from hereditary privilege and frozen class systems—is a lot harder than decrying the EU as a villainous behemoth.

Beyond blame, populist ideology relies heavily on nostalgia. Much of the current upheaval in Europe evokes Edmund Burke’s repudiation in 1790 of the French Revolution as the product of a misguided faith in ideas that defied people’s attachment to history and tradition.

For the UK’s Brexiteers, the borderless world that the EU, with its commitment to globalization, represents is destroying the nation-state, which better protected their interests. In their referendum campaign, they recalled a past when jobs were secure, neighbors were familiar, and security was assured. Whether that past ever really existed was irrelevant.

The last time European democracies were overtaken by radical political movements, in the 1930s, demagogues based their support largely on the old lower middle class, whose members feared being dispossessed and pushed into poverty by uncontrolled economic forces. In the wake of the protracted euro crisis, and the painful austerity that followed, today’s populists have been able to play on similar fears, again primarily among older workers and other vulnerable groups.

Of course, Europe is not alone in being swept up by populism. The United States, where Donald Trump has secured the Republican nomination to be president, is also in serious danger. Trump paints a bleak picture of life in the US today, blaming globalization (specifically, immigration) and the ‘establishment’ leaders who have advanced it for the struggles of ordinary American workers. His slogan, ‘Make America Great Again,’ is the ultimate display of false populist nostalgia.

Moreover, just as Brexiteers want to withdraw from Europe, Trump wants to withdraw the US from international arrangements of which it is a part, if not the linchpin. He has suggested dispensing with NATO, declaring that US allies should have to pay for America’s protection. He has also launched tirades against free trade and even the United Nations.

As elsewhere, Trump’s protectionism and national narcissism are sustained by the anxiety of those hit by the impersonal dark forces of the ‘market.’ The turn toward populism constitutes a revolt against intellectual orthodoxy, embodied by cosmopolitan professional elites. In the Brexit campaign, ‘expert’ became a slur.

This is not to say that challenging the establishment is entirely without merit. The establishment is not always in touch with the people. Populism can sometimes be a legitimate channel for aggrieved voters to make their frustrations known, and to call for a change of course. And in Europe, there are plenty of legitimate grievances: austerity, widespread youth unemployment, a democratic deficit in the EU, and an overloaded bureaucracy in Brussels.

But, rather than focus on real solutions, today’s populists are often appealing to people’s basest instincts. In many cases, they are emphasizing feelings over facts, stoking fear and hate, and relying on nativist appeals. And, in fact, they are less interested in tackling economic grievances than they are in using those grievances to win support for an agenda that would roll back social and cultural openness.

This is most apparent in the immigration debate. In the US, Trump has won support with proposals to block Muslims from entering the US and to build a wall to keep out those crossing the border from Mexico. Likewise, in Europe, populist leaders have capitalized on the influx of refugees fleeing conflicts in the Middle East to convince people that EU-imposed policies threaten not just Europeans’ security, but also their culture.

The fact that nearly all of the regions in Britain that voted for Brexit received massive EU subsidies supports this interpretation. So do circumstances in Germany. Though the arrival of a million largely Muslim immigrants last year has not hurt the economy—which remains at full employment—many people are rejecting Chancellor Angela Merkel’s vision of a new, more multicultural Germany.

Simply put, for many Europeans, immigrants represent less a threat to their livelihoods than a challenge to their national and tribal identities. Populist leaders like the UK Independence Party’s Nigel Farage have not hesitated to capitalize on this cultural anxiety, leading British voters ultimately to vote against their own interests.

And yet the grievances which populists like Farage and Trump manipulate are real. To preserve the principles of openness and democracy on which continued social and economic progress depends, those grievances must be understood and addressed. Otherwise, populists will continue to win support, with potentially severe consequences, as the Brexit debacle shows.

Fortunately, there is also precedent for escaping populist takeovers. In the 1930s, as Europe drifted into the hands of either tyrants or banal democratic leaders, America’s Coughlins and others were overshadowed by President Franklin Roosevelt’s New Deal. And a new deal—one that corrects the EU’s yawning democratic deficit and puts an end to self-defeating austerity policies—is precisely what will save Europe today.

The failed coup in Turkey has reminded us—as though a reminder was needed—of the once-inconceivable stability that the European Union has brought to Europe. But if the post-Brexit EU is to survive, it’ll need to change the way it thinks about itself.

So far, sad to say, this isn’t happening. Immediately after the Brexit vote, for example, the six founding countries of what used to be the European Economic Community (EEC)—Belgium, France, Germany, Italy, Luxembourg, and the Netherlands—gathered to discuss what to do. To no one’s surprise, the other 21 EU member states felt offended at being left out.

This incident points to the larger challenge that the EU must overcome if it is to secure its post-Brexit future. Simply put, the idea of the Union must resonate with all Europeans, not just those who get invited to exclusive meetings.

The EEC was established in 1957, and the official aspiration then, as it is now for the EU, was to recreate the Europe of Charlemagne that existed more than a thousand years ago.

Since then, European leaders have gathered time and again by Charlemagne’s ancient throne in Aachen, in the German state of North Rhine-Westphalia, to deliver visionary speeches announcing that the time has finally come to build a truly integrated Europe. Aachen has turned into the Mecca for true believers in the EU’s founding myth.

While I agree that Charlemagne is an intriguing historical personality, I do not find him particularly inspiring. He was an impressive warrior, but probably an illiterate one, and the empire he created fell apart soon after his death. The rise of Europe and the West certainly did not start with Charlemagne.

The Europe that inspires me isn’t the Europe of old warriors; it’s the Europe of the thinkers and the traders. It’s their contributions that, over the centuries, transformed Europe from the global backwater it had become after the fall of Rome into a hub of intellectual progress and innovation that created the West and changed the course of humanity.

This is the Europe of Copernicus and Erasmus, Henry the Navigator and Isaac Newton, and all the other pioneers who unshackled the human mind from the superstition and prejudice of the immediate past. Their Europe was wide and borderless, far larger than the Europe of Charlemagne. Immanuel Kant’s treatises on how republics could achieve ‘perpetual peace’ were written in Königsberg, in what today is a part of Russia. And the great trading cities of Gdansk, Seville, and Venice maintained links far beyond the borders of today’s EU.

The European project can be renewed only if those who support it move away from the limited Charlemagne-inspired vision, stop talking about ‘old’ and ‘new’ members, and demonstrate in words as well as deeds that they are open to ideas from every part of Europe. The EU will not work unless all member states are regarded as equals in determining a common future.

In 2004, when the EU added 10 new members (including eight ex-communist countries), I half-jokingly suggested that the Union move its headquarters from ‘old-EU’ Brussels to a more geographically central, ‘new-EU’ location, such as Bratislava, the capital of Slovakia. The idea behind this fanciful thought was to symbolise the abandonment of a conceptual model that I saw hindering a more open, diverse, and inclusive Union.

The move from Brussels obviously didn’t happen, but neither did the mental transformation from that old Aachen paradigm. Unfortunately, there can be little doubt that the conclaves held by the Aachen brotherhood within the Brussels bubble provided much fodder for the ruthless, and ruthlessly dishonest, pro-Brexit campaigners. Unless it is overcome, the Aachen mindset will continue to serve a similar purpose for nationalist campaigners in other member states.

It is, of course, a dangerous myth that Brussels has been grabbing power from EU member states. In reality, the gradual erosion of national powers in an increasingly interdependent world has made it necessary for member states to forge, by agreement, common solutions to common challenges.

Common solutions require inclusion and a spirit of cooperation. When the leaders of all 27 remaining EU member states gather in Bratislava in September, they should begin to return Europe to its members—and that means to all of them. The post-Brexit EU must be a Union that is much more closely linked to the political realities of its member states.

Although a new building for such gatherings is rising in Brussels, perhaps we should go back to having at least some EU summits in different parts of Europe. The Bratislava summit could be the start of a new effort to connect the European endeavor with all of Europe.

The era of Aachen is over; the age of Bratislava has arrived. We need more Europe—and less Brussels. If we embrace this new model—and stick to it—the EU will not only survive; it will thrive.

Digesting the full implications of the United Kingdom’s ‘Brexit’ referendum will take Britain, Europe, and the world a long time. The most profound consequences will, of course, depend on the European Union’s response to the UK’s withdrawal. Most people initially assumed that the EU would not ‘cut off its nose to spite its face’: after all, an amicable divorce seems to be in everyone’s interest. But the divorce—as many do—could become messy.

The benefits of trade and economic integration between the UK and EU are mutual, and if the EU took seriously its belief that closer economic integration is better, its leaders would seek to ensure the closest ties possible under the circumstances. But Jean-Claude Juncker, the architect of Luxembourg’s massive corporate tax avoidance schemes and now President of the European Commission, is taking a hard line: ‘Out means out,’ he says.

That kneejerk reaction is perhaps understandable, given that Juncker may be remembered as the person who presided over the EU’s initial stage of dissolution. He argues that, to deter other countries from leaving, the EU must be uncompromising, offering the UK little more than what it is guaranteed under World Trade Organization agreements.

In other words, Europe is not to be held together by its benefits, which far exceed the costs. Economic prosperity, the sense of solidarity, and the pride of being a European are not enough, according to Juncker. No, Europe is to be held together by threats, intimidation, and fear.

That position ignores a lesson seen in both the Brexit vote and America’s Republican Party primary: large portions of the population have not been doing well. The neoliberal agenda of the last four decades may have been good for the top 1%, but not for the rest. I had long predicted that this stagnation would eventually have political consequences. That day is now upon us.

On both sides of the Atlantic, citizens are seizing upon trade agreements as a source of their woes. While this is an over-simplification, it is understandable. Today’s trade agreements are negotiated in secret, with corporate interests well represented, but ordinary citizens or workers completely shut out. Not surprisingly, the results have been one-sided: workers’ bargaining position has been weakened further, compounding the effects of legislation undermining unions and employees’ rights.

While trade agreements played a role in creating this inequality, much else contributed to tilting the political balance toward capital. Intellectual property rules, for example, have increased pharmaceutical companies’ power to raise prices. But any increase in corporations’ market power is de facto a lowering of real wages—an increase in the inequality that has become a hallmark of most advanced countries today.

Across many sectors, industrial concentration is increasing—and so is market power. The effects of stagnant and declining real wages have combined with those of austerity, threatening cutbacks in public services upon which so many middle- and low-income workers depend.

The resulting economic uncertainty for workers, when combined with migration, created a toxic brew. Many refugees are victims of war and oppression to which the West contributed. Providing help is a moral responsibility of all, but especially of the ex-colonial powers.

And yet, while many might deny it, an increase in the supply of low-skill labor leads—so long as there are normal downward-sloping demand curves—to lower equilibrium wages. And when wages can’t or won’t be lowered, unemployment increases. This is of most concern in countries where economic mismanagement has already led to a high level of overall unemployment. Europe, especially the eurozone, has been badly mismanaged in recent decades, to the point that its average unemployment is in double digits.

Free migration within Europe means that countries that have done a better job at reducing unemployment will predictably end up with more than their fair share of refugees. Workers in these countries bear the cost in depressed wages and higher unemployment, while employers benefit from cheaper labor. The burden of refugees, no surprise, falls on those least able to bear it.

Of course, there is much talk about the net benefits of inward migration. For a country providing a low level of guaranteed benefits—social protection, education, health care, and so forth—to all citizens, that may be the case. But for countries that provide a decent social safety net, the opposite is true.

The result of all this downward pressure on wages and cutbacks in public services has been the evisceration of the middle class, with similar consequences on both sides of the Atlantic. Middle- and working-class households haven’t received the benefits of economic growth. They understand that banks had caused the 2008 crisis; but then they saw billions going to save the banks, and trivial amounts to save their homes and jobs. With median real (inflation-adjusted) income for a full-time male worker in the US lower than it was four decades ago, an angry electorate should come as no surprise.

Politicians who promised change, moreover, didn’t deliver what was expected. Ordinary citizens knew that the system was unfair, but they came to see it as even more rigged than they had imagined, losing what little trust they had left in establishment politicians’ capacity or will to correct it. That, too, is understandable: the new politicians shared the outlook of those who had promised that globalization would benefit all.

But voting in anger does not solve problems, and it may bring about a political and economic situation that is even worse. The same is true of responding to a vote in anger.

Letting bygones be bygones is a basic principle in economics. On both sides of the English Channel, politics should now be directed at understanding how, in a democracy, the political establishment could have done so little to address the concerns of so many citizens. Every EU government must now regard improving ordinary citizens’ wellbeing as its primary goal. More neoliberal ideology won’t help. And we should stop confusing ends with means: for example, free trade, if well managed, might bring greater shared prosperity; but if it is not well managed, it will lower the living standards of many—possibly a majority—of citizens.

There are alternatives to the current neoliberal arrangements that can create shared prosperity, just as there are alternatives—like US President Barack Obama’s proposed Transatlantic Trade and Investment Partnership deal with the EU—that would cause much more harm. The challenge today is to learn from the past, in order to embrace the former and avert the latter.