Thursday 8 March, 2018 Update: The EU’s Vulnerable Southern Flank

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The Italian general elections on Sunday ended up as a triumph for Italy’s populist parties. The Northern League and Five Star Movement (M5S) were the major winners. Both parties campaigned on anti-establishment, anti-immigration, and anti-European Union platforms. A new government has yet to be formed and it could be some time yet before that happens. However, that government will almost assuredly be staunchly anti-European Union in sentiment, as well as in deed.

Italy has long been considered to be one of the economic problem children of the European Union, along with Greece, Portugal, and Spain. The growing debt and economic vulnerability of of the Southern European EU members brought about an era of austerity from Lisbon to Athens. Austerity was more than enough for Southern European nations to contend with. But then came the European migrant crisis which saw continuous waves of African, and Middle Eastern migrants washing up on Southern European shorelines.

Italy was arguably the hardest hit. Austerity, and the migrant crisis combined to bring about a political shift in Italy. In recent years, voters have moved away from mainstream political parties, and tossed their lot in with populist parties that are opposed to essentially everything that the European Union supports. Brussels, and Rome appear to be fated towards a clash down the road and the EU is not waiting for the new government to form before it fires the first shot.

Yesterday, the European Commission urged Italy to increase economic reforms. The nation’s recovery from the 2008 crisis continues, yet at a sluggish pace. The commission also cited ‘excessive economic imbalances’ present in Italy. To be fair, the commission’s report also pointed to Cyprus and Croatia as having similar problems, yet their inclusion serves to highlight the fact that the EU’s southern flank is becoming increasingly vulnerable.

This increases the scrutiny which will be placed on Rome in the coming months. The new Italian government will not be as receptive and compliant to EU ‘economic suggestions’ as Greece and Alex Tsipras’ government was in 2015. More to the point, Rome will not submit itself to the wishes of Brussels, and the veiled threats of Angela Merkel like Athens did. The EU feels it would be in its best interests to have a stake in determining Italy’s economic policies for the foreseeable future. How far Brussels is willing to go to keep its influence alive remains to be seen?

What will Italy’s reaction be to increased EU bullying? An Italexit could have severe consequences for Brussels and signal the final nail in the coffin for the great European Experiment.

 

Monday 5 December, 2016 Update: In The Referendum’s Aftermath

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As he promised, Italian Prime Minister Matteo Renzi will step down following the defeat of his constitution reform plan. On Sunday, Italian voters rejected the constitutional referendum, opening the door to Italy’s future. The question is: now what? Analysts have been having a field day trying to figure out an answer for the last two weeks or so. As the referendum drew closer, the question was asked more frequently. With the vote now complete and the results tallied, Italy has to take a long hard look at itself and choose the path that will bring it political stability and economic growth, something that has eluded the nation for quite some time.

Short term, there will likely be a period of domestic political instability. With Renzi resigning, a new government needs to be formed. It will be up to Italian president Sergio Mattarella to piece together that government and determine the best way to do so. The leading political parties in Italy will be brought together to try and reach an agreement on a new government. It will be in the best interests of the major parties to do this without having to rely on elections. The 5 Star Movement (M5S) and Northern League will likely push for them because of the effects which will come from the Italicum law, a major change to Italy’s electoral laws engineered by Renzi when he came to power. The change stipulates that the winner of the next election will automatically take a majority of seats in parliament. With M5S and the Northern League riding high after the referendum vote, it’s apparent why both parties prefer to put the decision in the hands of voters. With that in mind, the populist M5S will likely not assume control of the government now or anytime soon.

Economically, the referendum results do not change the myriad of problems facing Italy’s banking system. Worries about the banks, as well as low economic growth could potentially fuel the Eurosceptic mood that is growing in the nation and across Europe. There has also been concern that the referendum results will potentially place Italy on a path to leave the euro. M5S has blamed many of the nation’s economic woes on the single currency system.

Speaking of the euro, there is the reaction of the EU establishment to consider. So far, there has been a mixture of brave faces, unenthusiastic declarations, and heads buried in the sand. Wolfgang Schaeuble, Germany’s finance minister called for calm, stating emphatically that there is ‘no reason to talk of a euro crisis.’ He fails to mention or acknowledge the truth that there is already euro crisis in full swing. This weekend’s referendum results are a clear indicator of it. The EU is either unable or unwilling to face the fact that Brexit, anti-immigration sentiment and the populist-fueled political movements are indicators that a growing number of European voters are dissatisfied with the European Union and politicians closely aligned with EU doctrine and policies.