Wednesday 30 May, 2018 Update: Europe Approaching Crisis Mode

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Here we go again. A political crisis in a European Union member-nation is pushing the supranational body into deep panic mode. If this were not enough, the Italian political situation is also bringing about a fresh round of global economic anxiety. There is growing concern around the world that the current situation could potentially threaten the global economy and spark a financial crisis greater in scope than the one the world endured from 2007 to 2009. Running parallel to this unease is the fear that Italy’s political ‘turmoil’ could lead to a permanent weakening of the European Union, and possibly the end of the euro.

In Rome, two anti-establishment parties have failed to form a government after months of negotiations. General elections will take place over the summer, most likely. It is probable that the Italian government will be headed by a populist party following those future elections. A major populist victory in Italy could be the death knell for the EU. Populism has been gaining ground across Europe since Brexit and the Trump victory in the United States, and Brussels has been unable to effectively quell, or challenge it. Eastern and Central Europe are becoming solid bastions of populist governments. In Germany, Angela Merkel’s power has been sapped following the surprising results of the general elections in September, 2017. Although she has managed to form a coalition government, it resembles a house of cards. The German chancellor’s influence in Europe has dropped considerably since then. In the midst of this emerging Italian crisis, Merkel announced she would be willing to work with any coalition government that emerges in Rome, but discussions on economic policy would have to take place within the guidelines governing the euro zone. If Italy forms a stable,  pro-European government in the coming months, Merkel’s advice will no doubt be heeded.

Should the opposite happen, and an anti-establishment government comes to power, all bets are off. Merkel’s warnings will be ignored and there’s a good chance the next Italian government will begin moving towards an imminent exit from the EU. What must be remembered is that Italy went from being pro-EU to anti-EU in a very short time period. The reason is the immigration crisis, and EU’s handling of it. The last elections in Italy were all about immigration. Anti-immigration, and anti-EU sentiment were unleashed at the polls.

Even with its political future somewhat murky, the odds are that the anti-EU sentiment in Italy is not going to dissipate soon. If the EU cannot change this, it will face an even greater crisis in the months to come.

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