The EU faces a mess of its own making. It is more than likely the EU will end this decade. We are witnessing it right now.
The test for the EU’s survival rests on the unfolding Italian banking crisis. Matteo Renzi has promised to resign if he loses a referendum on constitutional reform in October, which threatens to alter the financial foundations of Italy and impact upon other economies tied to the failing Eurozone.
Renzi’s resignation would be badly received by markets that have demonstrated their support for his reform agenda.
Opposition parties are more determined than ever before to divorce from Brussels and with Brexit inspiring many anti-EU politicians across the continent, they will gear themselves up to separate from the EU. Ultimately, this depends upon Renzi’s ability to persuade his opponents to support his reforms.
Government buildings have the union flag proudly flying outside of them. Italian politicians are proud of the part their country has played in founding the EU.
However, many Italians are angry that the continuing migrant crisis and the EU’s failure to reform freedom of movement, as well as ongoing negotiations over its economy, has caused Italy to suffer.
The Five Star Movement, a Eurosceptic party in Italy, celebrated Britain’s historical decision to vote to leave the EU. They have now become the most popular party in Italy after they won a quarter of the national vote in 2013 and last month won the mayoral seats in Turin and Rome.
Whilst the Democratic Party has 29.8 per cent of the popular vote, the Five Star Movement are ahead with 30.6 per cent of the vote.
Italy’s bank shares sunk this week, demonstrating that they are suffering as a result of non-performing loans and continuing political instability. Italy is likely to face another recession and cause a meltdown not witnessed in Europe since the Greek crisis.
Furthermore, Italy has experienced virtually no productivity growth since it joined the euro in 1999. The Italian political establishment fails to understand that it has the potential to lose the October referendum. Equally, they believe that Five Star will not emerge victorious either. Yet the result here in Britain on June 23rd should suggest that they have everything to fear at the moment.
A Pew Research Center poll on views towards European integration suggests that the Italians view European integration negatively. The euro has long been associated with severe economic problems in Italy.
As Wolfgang Munchau from The Financial Times writes, an Italian exit from the eurozone:
‘would probably lead to the most violent economic shock in history, dwarfing the Lehman Brothers bankruptcy in 2008 and the 1929 Wall Street crash. But my sense is that those who would advocate an Italian departure might even relish bringing down the whole house.’
The EU’s problems cannot be solved without full political union. It will not be Brexit that will destroy the EU. This emerging Italian banking crisis has every potential of doing that instead.