There a strong presumption that a rejuvenated Franco-German relationship can relaunch the European project. That presumption is inaccurate. The problem is not that Emmanuel Macron has too much on his plate domestically or that Angela Merkel did not get the electoral results she (and Macron) might have wanted. The major constraint on a Franco-German relaunching of Europe is not even that the French and Germans disagree on fundamental issues related to reforming macroeconomic governance in the euro area. Rather, the reason a new partnership between France and Germany is not going to relaunch the European project is that Europe is not the same.
On 21 August, I was invited to talk about the importance of ‘walls’ in a European context at an annual socio-cultural-political event called ‘The Meeting’ in Rimini. I sketched these notes as an aide for the interpreters who were supposed to render my unique version of the English language into fluent Italian. My host, Paolo Magri, insisted that I speak in Italian instead. What followed was probably more authentic as a set of off-the-cuff remarks using my one hundred and fifty mangled Italian vocabulary words, but it may not have delivered the full message. My central argument is that we should be wary of identity-based political mobilization. Any politician who wants to mobilize ‘us’ against ‘them’ is not your friend. That is as true in the United States as it is in Europe. Alas, Europe’s history with that kind of politics is a tragic one. Let’s hope we don’t have to experience it again.
The Italian government passed a series of decrees yesterday to allow Intesa San Paolo to buy the healthy assets of two small banks from the Veneto region – Banca popolare di Vicenza and Veneto Banca. The state will move the distressed assets into a ‘bad bank’ for orderly liquidation. This action closes a chapter on the Italian banking crisis that started in late 2015 when regulators made it clear that the two small Veneto banks needed more capital. Over the intervening period, investors threw good money after bad as the banks continued to haemorrhage deposits and mount up non-performing loans. The government did not want to step in because it did not want to impose losses on large depositors or junior bond holders. Ultimately, though, the situation for the two institutions was unsustainable. Now we know what the solution looks like. The question is what we learned from the process. The short answer is that Europe’s banking union is still dangerously incomplete.
The upsurge of populism in the United States and Europe has us asking the wrong questions. The issue that should concern us is not what populists have in common. The similarities between Donald Trump and Marine Le Pen or Nigel Farage are unimportant. We also should stop wondering why voters on both sides of the Atlantic are so easily beguiled by political messages that combine rejection of the ‘establishment’ with some kind of appeal to identity politics. There has never been a shortage of voices calling for the overthrow of the elite or disgruntled voters willing to follow them and any slogan that promises that a history of victimhood can be replaced wth a future of privilege is always going to be attractive. Such mobilization against ‘the system’ is a hardy perennial of democratic politics.
The inauguration of Donald Trump as 45th President of the United States represents the triumph of populism over the world’s greatest democracy. It also sets the stage for populists to make further gains across Europe. Trump’s affection for Nigel Farage is plain to see. His affinity for (and his attraction to) populists of other shades is easy to find as well. The challenge is to sort out what this means for the European project. Populists tend to stake out Euroskeptical positions, and Donald Trump has made no secret of his indifference for the European Union, but it is hard to say just how populists can have a lasting impact unless they somehow manage to seize control over government.
The political landscape of Europe is changing rapidly and in ways that are hard to interpret. The recent Italian referendum is a good illustration. Matteo Renzi inherited an agenda to reform the Italian constitution when he became prime minister. He negotiated an agreement with the centre-right on the precise details of the package. He shepherded the agreement through two majority votes in each of Italy’s two chambers of parliament. He then brought the agreement to a popular vote as per constitutional requirement and with an electorate broadly disenchanted with politics and therefore favourable to reform. Nevertheless, virtually every party outside the government opposed the reform package and Renzi lost the referendum vote by a spread of twenty percentage points. Now Renzi is out of office. Italy is without a viable electoral system because of changes made in anticipation of the (failed) constitutional reforms. And it is unclear whether the new government headed by Paolo Gentiloni has sufficient support in the Senate to pass a new electoral law. Most Italians did not want Renzi’s constitutional reforms and yet they are not happy with the status quo either. Disillusionment with politics has grown as a result.
The meme that is circulated about the referendum in Italy is that Prime Minister Matteo Renzi gambled heavily and lost. Having staked his political future on the success of a controversial constitutional reform package, Renzi has now placed both the country’s financial system and the euro area as a whole in jeopardy. As with most memes, there is some truth hidden in this assertion. There is also much that is misleading. The complicated reality is that Renzi must have recognized that it would be hard to win the referendum. He also must have realized that he had little choice but to try.