Italy referendum: Does Renzi’s exit spell disaster for the EU project?

The storm clouds over Brussels parted briefly over the weekend. Bucking the polls, an Austrian far-right politician failed in his bid to become president, losing to a pro-EU Green. But any glimmer of optimism was rapidly extinguished.

Just hours after that disaster was averted, news came in from Rome: Prime Minister Matteo Renzi was on his way out after losing a referendum on constitutional reform.

While the historical symbolism of having an Austrian far-right leader come to power would have been a PR disaster, the fall of Mr Renzi will have more far-reaching consequences for a European Union which can’t seem to recover from one blow before succumbing to the next.

But whether it was a resounding victory for the populists – both the eurosceptic Five Star Movement and the far-right Northern League campaigned for a “no” vote – or simply a reflection of the complexity of Italian domestic politics depended on who you asked.

“The referendum was about a change to the Italian constitution, not about Europe,” insisted Margaritis Schinas, the European Commission’s spokesperson.

Not so, claimed the EU’s many critics. Marine Le Pen of France’s Front National, who is hoping to inflict another blow to Brussels with her bid to become French President next year, said that “we must listen to this thirst for freedom”. Syed Kamall, a British Conservative MEP, declared that the “Italian voters have issued yet another wake-up call to European leaders… [who] will put their fingers in their ears yet again and find someone else to blame.”

Whether or not the Italians did indeed intend to raise an alarm in Brussels, or simply punish an unpopular leader, the reverberations of the vote will be felt across Europe.

Mr Renzi is going to be missed by the dwindling number of liberal-minded, pro-EU leaders, particularly Chancellor Angela Merkel in Germany, who had an ally in Mr Renzi when pushing her moral approach to the refugee crises.

The result in Italy was “not a positive development in the case of the general crisis in Europe”, Germany Foreign Minster Frank-Walter Steinmeier observed dryly.

While the young, energetic Mr Renzi would often provoke and disagree – notably on the EU’s policies on migration and austerity – he was undoubtedly engaged in Europe, and saw the EU as the place for Italy to wield its influence.

His opponents in the Five Star Movement, however, want to hold a referendum on withdrawing Italy from the euro, arguing that the country’s membership of the single currency is not bringing equal benefit to all.

Certainly, the state of the Italian economy is a worry to many. Italy is the eurozone’s third largest economy after Germany and France, but growth had stagnated and public debt soared. All eyes will be on the stability of the banks during any uncertainty, and the euro slumped soon after the result was known.

A fresh financial crisis is not what the EU needs right now. In recent years it has lurched from one disaster to another across every sphere, ranging from deteriorating relations with Russia, the mishandling of the refugee crisis, the blow of Brexit, then the election of Donald Trump and the likely disintegration of a trade deal with the US.

Next year, elections in France, the Netherlands and Germany threaten to bring even more populists to office, and no one is looking forward to the messy Brexit negotiations.

For the moment in Italy, there is quiet uncertainty. President Sergio Mattarella has asked Mr Renzi to delay his resignation until after the 2017 budget has been approved, which could be as early as the end of the week.

Mr Mattarella is then expected to appoint an interim prime minister with the support of the Democratic Party though to the next scheduled elections in 2018, or at least until the end of this year.

But the Five Star Movement is already pushing for earlier polls, as is the Northern League, two parties who may differ in their overall outlook but have one key bugbear in common.

“Both these parties are strongly Eurosceptic and would probably put the theme of Europe and Italy’s membership in the EU and the euro at the centre of a campaign that promises to be highly polarised,” said Silvia Merler, an analyst with the Brussels-based Bruegel think tank.

In March 2017, EU leaders are due to gather in Rome to launch their vision for the future after the trauma of Brexit.

Right now, it is not even clear who will chair that meeting, let alone what solutions they will come up with to convince their electorates to believe in them again.