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.
On 30 August 2016, the European Competition Commissioner, Margrethe Vestager, announced that ‘Ireland granted undue tax benefits up to EUR 13 billion to Apple.’ Those benefits distort competition within the European marketplace and so the Commission instructed Ireland to recover the unpaid taxes. This announcement ignited a storm of protest from Apple and from the Irish government. It also sparked a wider debate about how multinational companies are taxed and about whether some form of tax harmonization is essential to the functioning of Europe’s internal market. Although some general principles have emerged from the conversation, the deeper implications of the controversy remain unclear. The debate here is less about the treatment of a single company than about the way European governments have tried to promote regional development and how the United States has relied on multinational corporations to exert influence in the wider world.
The British vote to leave the European Union (EU) has introduced a new political dynamic in Europe. For lack of a better term, let’s call it ‘disintegration’. The problem is that we know very little about the many different motivations and other forces at work. Disintegration is not integration in reverse. We cannot simply take the many different models or interpretations of what brought European countries together and run them backward to understand events as they are unfolding. We cannot use past experience as much of a guide to anticipate future events or developments either. Lacking a coherent theory of disintegration, we are left to rely primarily on guesswork. Given how most commentators performed in forecasting Britain’s vote to leave the EU, my suspicion is that much of that guesswork will prove inaccurate. We are still sailing in uncharted waters.
The center left in Europe is ceding ground almost everywhere. The British Labour Party not only lost the May 2015 elections but then threw itself into the arms of Jeremy Corbyn. Barring a Brexit debacle for the ruling conservatives, Labour is unlikely to return to power in the next decade despite Corbyn’s success at recruiting new party activists. The Spanish socialist workers party (PSOE), having been weakened by widespread corruption, jettisoned its leader and looks ready to offer tacit support for a minority government led by the conservative Popular Party (PP) to avoid facing the voters this December.
The U.S. Ambassador to Italy, John Phillips, caused a minor uproar by telling the Italians that international investors were going to be disappointed with a ‘no’ vote in the upcoming referendum on constitutional reforms. At about the same time, Finch announced that a popular rejection of the reforms would put downward pressure on the country’s ratings. The Italians responded that the ambassador should mind his own business and that the ratings agencies should find some new analysts. Italy will be fine whatever the referendum outcome, they insisted. If anything, this unwelcome foreign intervention is going to encourage the Italians to vote against the reforms just to prove a point. The echoes with Brexit were obvious – and widely noted. So is Italy headed for disaster or is this just another storm in a teacup?
The referendum campaign on whether Great Britain should remain a member state of the European Union (EU) or leave is in full swing. Campaigners for Britain to ‘remain’, including Prime Minister David Cameron, insist that the British government has successfully renegotiated its relationship with the EU. Those who want Britain to ‘leave’ insist that the opt-outs Cameron won are insignificant and untrustworthy; whatever the British government may say, the bureaucrats in Brussels are plotting a ‘super state’ that will usurp British sovereignty.
Italian Prime Minister Matteo Renzi gave an interview to the Financial Times shortly before Christmas to criticize the impact that successive waves of austerity are having on political stability in southern Europe. The interview had particular resonance in the aftermath of the Spanish national elections. Spanish Prime Minister Mariano Rajoy was in many ways Europe’s ‘best’ student in terms of economic policymaking. Rajoy not only narrowly escaped the doom loop that tied the fate of the Spanish government to the solvency of its banks, but he also avoided the indignity of falling under official European economic tutelage. He has not always does as told by his European counterparts but his government is often held us as a model of successful macroeconomic adjustment and fiscal consolidation in the face of crisis. His ‘reward’ has been a splintering of the Spanish electorate and a hung parliament. For Renzi, the fate of his ‘friend Mariano’ is an inevitable consequence of Europe’s obsession with austerity.