Italy has not voted against the EU, but has given Brussels more reason to worry
Last night, Italian prime minister Matteo Renzi resigned after suffering a heavy defeat (60-40) in a referendum on constitutional reforms.
As the news filtered through and the euro dipped, comparisons between this vote, Britain’s EU referendum and the election of Donald Trump were inevitable. However, while the Italian referendum casts some light on the growing power of anti-establishment, anti-European populism, it is a unique case and cannot be analysed simply through analogy.
Here are five initial points to bear in mind.
1. Italy has not voted to leave the EU
This was a debate about constitutional reform that became a referendum on the government of Matteo Renzi. The prime minister was attempting to reform the way the political system operates to give Italian governments greater capacity to enact legislation and create change.
Whatever the right-wing populists claim, it was not a vote the euro or EU membership; nowhere close to 60 per cent of Italians support leaving the EU.
Anyone attempting to reduce the result to a single, simply narrative must grapple with the fact that a broad coalition of voters and parties opposed the referendum. While Beppe Grillo got the most screen-time, Silvio Berlusconi, Mario Monti and figures within Renzi’s own party all supported ‘No’, as did the majority of young, educated Italians.
While dissatisfaction with the EU (and particularly the eurozone) was undoubtedly a factor in the result, it was not the only factor. As Politico’s Ryan Heath argues, Italians voted to reject change and leaving the eurozone is the biggest change imaginable.
2. Political crisis is not unusual in Italy
Renzi was widely trusted by his European colleagues and by investors. His fall from power pushes Italy into something of a political crisis, with the possibility of a snap general election.
However, in the last 71 years, Italy has had 65 prime ministers, so political crisis is not new. That’s why Renzi was so eager for reform. While political instability has blighted the Italian economy, the country has always managed to stumble along, and the eurozone has managed to contain the precariousness of its third-largest member.
Of course, this will provide scarce comfort to frustrated Italian voters, who have seen virtually no growth in recent years and are grappling with youth unemployment of 37 per cent.
3. Italian banks are in danger
The real threat is to Italy’s banks, starting with Monte dei Paschi di Siena (MPS), the country’s oldest bank which is currently undergoing a €5bn rescue programme. Following the referendum result, market uncertainty will deter investors from re-capitalising the bank.
Seven other Italian banks are also in distress, so the worst case scenario is that the collapse of the MPS rescue plan triggers a mass failure of Italian banks, which would have economic repercussions for the entire eurozone.
Senior bankers are expected to meet this morning to discuss the next steps for MPS. And although banks initially faced losses as the results came out, their stocks have now begun to rally.
4. This is a victory for the 5-Star Movement
Italy’s anti-establishment party has said that it is ready to govern following the referendum result. At present, the polls give Beppe Grillo’s party a very strong chance of winning the next general election — an alarming prospect for other EU leaders.
— Europe Elects (@EuropeElects) December 5, 2016
The 5-Star Movement is difficult to place on the political spectrum. Unlike other populist upstarts of recent years, it doesn’t clearly fall on right or left. Indeed, aside from its promise of a referendum on Italy’s membership of the eurozone, the movement’s policies are pretty difficult to pin down.
However, there are many reasons to worry about the movement, not least Grillo’s support for Trump and Farage, his tendency towards xenophobia, and the party’s deep association with fake news and Kremlin propaganda.
5. European leaders keep losing referendums
Although the Italian referendum is not directly comparable with the Brexit referendum, there’s no question that European leaders are losing their hold over public opinion.
If we count the Dutch vote against the EU’s association agreement with Ukraine, this is the third major referendum defeat suffered by European governments in 2016, all of which have been warmly celebrated by eurosceptics, the far-right, and Moscow. There is no single straightforward explanation for these results, but they undoubtedly reflect growing fractures in the European project.
The UK is out, eurosceptical movements are uncomfortably close to seizing power in both Italy and France and far-right parties are on the rise. While the Italian result doesn’t bode the immediate collapse of the EU, there’s only so long that the union can stagger on in its current, rapidly-weakening state.
Niamh Ní Mhaoileoin is editor of Left Foot Forward. Follow her on Twitter
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