Not for the first time, Italy is in political turmoil. The prime minister, Matteo Renzi, has resigned after voters overwhelmingly rejected a referendum on constitutional change that was widely seen as a plebiscite on his leadership. While there are complex and dysfunctional politics at play – the incoming caretaker government will be the 64th in 70 years – the decision is more a reflection of economic circumstances.
The comparisons with the Brexit referendum in the United Kingdom, which led to the resignation of prime minister David Cameron, are obvious. But this decision is a symptom of the persistent economic malaise that has hit hard in southern Europe. Greece, Spain and Portugal are struggling along with Italy. And, as we have seen in Greece, there is no appetite among the electorate to vote for the painful economic reform needed to remedy the situation. The vote will certainly empower those who question the future of the European Union and the single currency. The former leader of Britain’s far-right United Kingdom Independence Party, Nigel Farage, tweeted that the referendum seemed to be “more about the euro than constitutional change”.
Since the adoption of the euro in 1999, government debt in Italy has soared to 133 per cent of annual economic output. In Europe, only Greece has a higher figure. Yet in both countries, voters have rejected necessary reforms because they will involve further austerity. This puts stress not just on the countries themselves but on the entire EU, and particularly its largest economies, Germany and France.
France’s socialist prime minister Francois Hollande has said he will not seek re-election, putting even more pressure on Germany’s Angela Merkel – who will face the polls next year – to keep the European project together. The referendum and its political fallout doesn’t end the financial crisis: it just kicks it further down the track. The problems besetting Italy and the other economies that have yet to recover from the downturn of 2008-2009 will deepen without a well-implemented economic solution. There is no shortage of populists and ultranationalists putting themselves forward for election, including the 5 Star Movement’s Beppe Grillo in Italy – but Europe, and the world, needs leaders who are prepared to push for, and are able to deliver, genuine and lasting economic reform.