The European state system, Leon Trotsky wrote in 1932, resembles “the ‘system’ of cages in an impoverished provincial zoo.” The European Union, the ideal of postwar reconstruction, was intended to replace the tariffs, borders, and belligerence of the old Europe. With the euro currency and the “four freedoms” of the movement of goods, people, services, and capital, it aspired to turn Europe into an economic safari park. Instead, the union has created a new set of problems and unleashed a political wildness that threatens its future.
The common currency impoverishes the states of the “southern tier” for the same reason it enriches users north of the Alps and Pyrenees, especially the zookeepers in Berlin and Brussels. The departure of jobs to Asia and the arrival of migrants from Africa and the Middle East have revived nationalism in the provinces, and the red-meat politics of bigotry too. The German economy has recovered since 2008, but the southern eurozone remains a wasteland of bailouts, enforced austerity, and unemployment levels last seen when Trotsky wrote that, in global economic terms, “Europe is on the downward trend.”
The work in which Trotsky made his zoological comparison was called What Next? It is now unavoidably clear that what happens next in the European Union will not resemble what its builders intended to happen. The architecture of economic and political “convergence” cannot be erected, because the electorates of the member states will not allow it. After June’s Brexit vote, the question is not whether the union and the eurozone will contract, but when and how. Europe’s centrist politicians may insist that the union will survive, but the markets think otherwise. In the last two years, the euro has slid from nearly $1.40 to near-parity at $1.06. Both Citigroup and Deutsche Bank expect the euro to drop below parity in 2017. What next, and where next?
Hence the nervousness about last weekend’s votes in Austria and Italy, and their remarkably high turnouts. On the face of it, neither vote should have been a cause of international concern. The Austrians were electing their president, a ceremonial official in a country that has not played a significant role in international affairs since the time of The Third Man. The Italians were voting in a referendum on reforming Europe’s most dysfunctional political system. Both ballots reveal how the economic and political failure of the union is undermining liberal democracy in its constituent states, and how the breakdown of national politics in turn undermines the union and its currency.
The result of the Austrian election was received with relief, but the choice itself should be cause for alarm. The winner, with 52 percent of the vote, was Alexander Van der Bellen. He led the Green party from 1997 to 2008, but ran as a nominal independent on a pro-EU platform. That a single-issue candidate could win by campaigning as Unser Präsident der Mitte, “Our President of the Center,” indicates the decay of the traditional center parties in Austrian politics. So does the strong showing of the loser, Norbert Hofer of the Freedom party.
Hofer also calls himself a centrist, but he is also a single-issue politician. The issue is national identity, narrowly defined. The preponderance of former Nazis among the founders of the Freedom party was remarkable even for 1950s Austria. As late as 2013, Hofer attended party gatherings wearing a blue cornflower on his lapel—a symbol of 19th-century pan-German nationalism and the marker by which Austrian Nazis identified each other when their party was banned between 1934 and 1938. Hofer has suggested that South Tyrol, a largely German-speaking province that has been part of Italy since 1919, should be returned to Austria. Earlier this year, Hofer said that Islam “has no place in Austria,” without explaining what that means for Austria’s Muslims.
Hofer ran an anti-EU campaign and took 48 percent of the vote. His defeat spares the European Union the shame of having to recognize Western Europe’s first postwar neofascist leader—for the moment, anyway. Austria’s next parliamentary elections will take place by September 2018. Current polls have the Freedom party set to win, with at least a third of the votes. The decay of capitalism, Trotsky observed, results in “social and cultural decomposition.”
The result of the Italian referendum could not be explained away, though it may yet be annulled by political maneuvering. Elected in 2014 as Italy’s youngest-ever prime minister, Matteo Renzi, the center-left mayor of Florence, promised to revive Europe’s fourth-largest economy. Nicknamed Il Rottamatore, “The Scrapper,” for his assault on state bureaucracy, employment law, and the tax system, Renzi managed to generate a small improvement in the economy; in May 2015, growth of 0.3 percent marked the end of the post-2008 recession.
The referendum was on Renzi’s proposal to extend his powers and ease further reforms, by weakening the power of the senate and shrinking it from 315 directly elected members to 100 local officials. But the voters took the referendum as a plebiscite on his premiership and an economic strategy that, placing the austerity economics of Brussels ahead of the needs of Italian voters, has failed to cure high unemployment, low growth, and wage stagnation.
Renzi, like David Cameron in the Brexit referendum, underestimated public dissatisfaction. He and his strategists believed that a turnout of over 70 percent would favor them. In a sense, it did. Renzi won in three high-turnout regions. Two, his home region of Tuscany and its neighbor Emilia-Romagna, are wealthy and reliably center-left. The third, curiously enough, was semi-autonomous South Tyrol, or Alto Adige as the Italians call it, another net contributor to the national budget. Unfortunately for Renzi, the other 17 regions, some of them notably less wealthy, also saw voters come out in force. With an overall turnout of 69 percent, Italians rejected Renzi’s proposal decisively, by 59 to 41 percent.
Renzi resigned, and Italy is now in limbo until elections scheduled for spring 2018 can be brought forward. After the vote, the nonpartisan Centre for Economics and Business Research said that there was “no doubt” that Italy could remain in the eurozone if Italians were “prepared to pay the price of virtually zero growth and depressed consumer spending for another five years.” But this is “asking a lot of an already impatient electorate.” The CEBR estimates the chances of Italy sticking to austerity measures and staying in the eurozone at “below 30 per cent.” Meanwhile, Italy’s banks are undercapitalized; the Monte dei Paschi di Siena, the world’s oldest bank, is five billion euros short.
The winner of the referendum, for now at least, is Beppe Grillo’s Five Star Movement. Grillo, a comedian turned activist, leads the oddest and most innovative of Europe’s new populist movements. The “five stars” of the FSM program are indistinguishable from the platitudes of the EU: clean water, public transport, sustainable development, Internet access, and environmentalism. But the FSM is Euroskeptic and against global liberalism.
Grillo has promised that should he enter government, he will hold a nonbinding referendum on Italy’s EU membership. Under current polls, the FSM could take 30 percent of the votes. The established parties may exploit another of Renzi’s reforms, a return to proportional representation, to prevent the FSM from turning votes into power. But absent an economic recovery, this would only defer and exacerbate popular frustration.
The Austrian and Italian results will not lead to “Öxit” and “Quitaly”—at least, not yet. They do show, however, that anti-EU populism is now on the cusp of victory within at least one of the eurozone states. Where next? The Netherlands, with elections in March 2017. A late November poll showed Geert Wilders and his anti-EU, anti-immigration Party for Freedom winning the largest number of seats. After that, the French presidential election in April looks likely to produce a second-round run-off between Marine Le Pen, who wants to withdraw France from the EU, and François Fillon, who recently called for the restructuring of an “inefficient” EU that is “an obstacle to our development and our freedom.”
And what next? As Fillon says, the EU is in a “critical” situation. The smart money is turning against the euro, and the voters, rattling their cages, are undercutting the zookeepers of Brussels from below. “As the witch’s house in fairy tales, so the entire European system has for its foundation a pair of hen’s legs,” Trotsky wrote in 1932. “The great and salutary hegemony of France is in danger of toppling over.”
Dominic Green, a fellow of the Royal Historical Society, teaches politics at Boston College.
