We review the literature on the rise of identity politics and populism in Europe. Populist parties have gained large vote shares since the Great Recession of 2008. We observe in many countries, and even in the European Parliament, a transformation of the main dimension of politics from the left-right cleavage to a new cleavage opposing the mainstream parties to populist parties. We examine how this transformation relates to changes in voter attitudes and the adjustment of political parties to these changes. Two main types of causes for the rise of populism have emerged: economic and cultural. In reviewing the evidence, we find a complex interaction between economic and cultural factors. Economic anxiety among large groups of voters related to the Great Recession and austerity policies triggers a heightened receptivity to the messages of cultural backlash from populist parties.