Europe’s embattled liberals must have breathed a sigh of relief last night after Austria’s Norbert Hofer conceded defeat in a presidential election that nearly created the first far-right head of state in the European Union’s history. But their nerves will be rattled again by Italian prime minister Matteo Renzi’s failure to convince his country to back his constitutional reforms in a referendum. Such an issue might sound dry, but Renzi made it a career-defining issue, promising to resign if he lost the vote, which he did as soon as the exit polls came out last night indicating that he was set for a heavy defeat. This pledge, our Europe editor Peter Foster writes, was his biggest mistake as it turned the vote into a referendum on his time in office.
There have already been signs of market jitters in response to Renzi’s resignation as investors considered the prospect of political instability in Italy, Europe’s fourth largest economy. The euro fell to the lowest level against the dollar since March 2015, sliding the most since the aftermath of the Brexit referendum. Higher-yielding currencies such as the Aussie and and kiwi dollars also retreated. The New Zealand dollar may have been reacting as well to the news that prime minister John Key is leaving (not due to losing a high-stakes referendum).
Italy’s referendum outcome has also energised the eurosceptic Five Star Movement, and anti-immigrant Northern League party, allies of French far-right leader Marine Le Pen. They have both called for an early general election to resolve the uncertainty. With the pro-EU establishment in disarray and Eurosceptic forces on the rise, could Italy be next out of the exit door after Britain? An ICM poll last December found that 27% of Italians would vote to leave the EU, and 11% hadn’t made up their minds – so the amount will almost certainly have risen since then. One man who would welcome the prospect of Quitaly (or Italeave?) is Nigel Farage, who has written in today’s paper that “the prospects of the European Union as 2017 approaches could hardly be bleaker”.
The British Government has its own problems this week as the Supreme Court considers whether to uphold, or reject the High Court’s ruling that Theresa May has to win approval from MPs in a vote before she can trigger Article 50 as part o the Brexit process. Attorney General Jeremy Wright will warn Supreme Court judges today that they must not defy the “will of the electorate” or “stray into areas of political judgement” during a landmark Brexit legal challenge. Ministers are privately already conceding that the Government is likely to lose the case and warning that the Supreme Court will create a “constitutional crisis” when it returns its ruling in January. Lord Howard writes in today’s paper that whatever the judges decide, Article 50 will not be stopped. “Two years of challenging negotiations will then follow,” he concludes. “And I have no doubt that they will end in circumstances which will give the United Kingdom greater and more exciting opportunities than we have seen for a generation”.