The Eurozone suffered a lost decade after 2008. Now, just as the European economy shows signs of health, its politics are sliding into dysfunction. Politicians in Brussels, Paris, and Berlin remain convinced that the European Union is intrinsically virtuous and historically inevitable. Voters, even in surplus-laden Germany, dare to differ.
And so Europe now presents a double image. On paper (and on screen), the economy is growing. In voting booths and on the streets, however, electorates are pulling apart from Brussels. In Germany, Chancellor Angela Merkel, a Christian Democrat, wants to resume “convergence” into a European super-state as soon as possible; Martin Schulze, her Social Democrat coalition partner, wants the same, but even sooner. Meantime, anti-Euro populists rack up success after success at the regional and national levels. The dynamics that forced Greece into bankruptcy, set Britain on the road to leaving the EU, and invited neofascists into national parliaments continue to intensify.
The E.U. has yet to come up with an answer to the migrant crisis or to the less visible but more disruptive flows of borderless capital. As long as its national electorates remain suspicious of convergence, the Union can’t create the strong central bank that might mitigate the economic imbalance between its northern creditor states and its indebted southern states. The case study in North–South dysfunction is Greece, but Greece’s problems are no different from those of other southern states. The old problems of oligarchy and overregulation exacerbate the new problems—debt and the draining away of educated young people. Finance ministers in Europe’s southern tier know that they need to stimulate and deregulate their economies, but they have one hand tied by domestic obligations and the other by German-led austerity.
The Greek tragedy has echoes in Italy and Spain, the Eurozone’s third- and fourth-largest economies. In Spain, youth unemployment is 38.7 percent, second only to Greece (43.3 percent). Catalonia, Spain’s most productive and wealthy province, has voted to secede, sparking a constitutional crisis. Podemos, a left-wing populist party looking to renegotiate Spain’s relationship with Brussels, is the third-largest party in the Madrid parliament. Italy shows similar symptoms. Youth unemployment stands at 35.1 percent, third-highest in the Eurozone. Secessionist parties, always strong in the industrial north, are now eyeing government ministries. Traditional attempts at reform have foundered. If a new crisis of the Eurozone is soon upon us, Italy could be its epicenter.
In 2014, Matteo Renzi of the center-left Democratic Party became Italy’s youngest prime minister. Like France’s regnant prodigy Emanuel Macron, Renzi promised to open up his country’s economy and labor market, and needed to reform the parliamentary process to pursue those objectives. Unlike Macron, he asked the public’s permission. In December 2016, Renzi called a referendum. The voters, reading his intentions, took the referendum as a vote on the technocratic convergence of Italy with the European Union. They voted against the reforms, and Renzi ceded the prime ministership to Paolo Gentilioni, his foreign minister. Gentilioni has strung out his time in office through parliamentary maneuvers, but the clock runs out on March 4.
It would be folly to guess the identity of Italy’s next prime minister. Italian elections are a prelude to ornate negotiations, and Italy’s postwar constitution was designed to produce coalitions. But it’s safe to say that Gentilioni’s replacement will insist on an alteration in relations with Brussels. The Five Star Movement, an Internet-based, Euroskeptic and quasi-anarchist insurgency founded by comedian Beppe Grillo, now rates as the nation’s most popular party. Recent polls suggest that Five Star, along with a center-right coalition that includes a secessionist party, would take a combined 54 percent of the vote. Even when we allow for the diluting effect of coalition negotiations, such a result on March 4 would produce a crisis in the Eurozone. At a time when the French and Germans are trying to jump-start convergence, the Italians would be insisting on a looser, less centralized relationship with Brussels.
The senior party in the center-right coalition, Forza Italia, is led by Silvio Berlusconi. Now 81, Berlusconi is banned from holding public office after his conviction on tax fraud. His most powerful ally is Matteo Salvini, leader of the secessionist Lega Nord (the League), but the alliance between the two is strained. Last month, Berlusconi told EU president Jean-Claude Juncker that if his coalition won, it would not challenge Brussels over the Euro. Salvini contradicted him: “We never changed our mind on the Euro. My idea is that the Euro was an experiment that went wrong.”
Salvini’s policies show how nationalist and Euroskeptic positions have entered the mainstream of European politics. While Brexit negotiators try to secure continued access to the EU’s “four freedoms”—goods, capital, services, and labor—E.U. voters seem to identify those freedoms as the causes of wage depression, outsourcing, mass immigration, and the overloading of welfare systems. Salvini describes Donald Trump and Hungary’s authoritarian prime minister Viktor Orban as “role models” who put their country’s interests first. Orban, Salvini says, “builds walls in the heart of Europe to stop migrants, he defends borders, defends banks, defends the currency and stops immigration.” Salvini promises to impose tariffs to protect Italian companies and workers. He has also criticized the E.U.’s sanctions on Russia over Ukraine for costing Italy “thousands of jobs.”
Salvini’s goal is to change the “dynamics and treaties” that govern Italy’s relationship with the EU. He wants an end to the austerity policies that he believes have immiserated Europe’s southern tier, and to assert the primacy of the Italian constitution over E.U. law. “Either Europe changes,” Salvini says, “or Italy—if it keeps being victimized—has no reason to stay in this cage.” March 4 looms large.