As Malta takes over the presidency of the Council of the European Union next month, it would be wise to brace ourselves for what lies ahead. If you thought 2016 provided a rough ride for the European Union’s prospects, just wait for the 2017 upheavals. Testing times lie ahead.
We have just had two important tests of the public mood, both of which may be harbingers for what lies in wait for Europe in the months ahead.
Austria held a presidential election with a far-right candidate, Norbert Hofer, vowing to push for a referendum on leaving the EU. Fortunately for stability in Europe, his opponent, Alexander Van der Bellen, a former leader of the Greens Party, won convincingly. However, the threat to Europe from the far right in Austria remains.
Although the result is a blow to Mr Hofer’s party, the populist Freedom Party - whose policy is “to put Austria first” and whose lineage is directly traceable to the Nazi Party – has a commanding lead over the traditional democratic Austrian parties of the centre that have held sway since the end of the war. Parliamentary elections are due in 2018 and these could still imperil the EU’s values of tolerance, free movement and equality.
Of far greater immediate political and economic import, however, is the result of the referendum ill-advisedly called by Matteo Renzi in Italy. Like David Cameron before him, Mr Renzi has suffered an overwhelming and stunning defeat in what has been described as Italy’s Brexit moment. He immediately announced he would step down.
Both the far-right Northern League and the populist Five Star Movement, which wants Italy to leave the euro, are demanding immediate elections. Although it may be early to predict what will happen next, the dangers are clear.
On the economic front, the deep fears of a financial meltdown in Europe’s third largest economy have not so far been realised. But up to eight Italian banks, laden with toxic debt and needing urgent stewardship, remain vulnerable and could fail. While share prices across Europe may have dipped, the euro has stood firm and the predicted shock waves through the markets and the banking system have been held at bay.
Politically, fears of paralysis are unlikely to be realised. Italian President Sergio Mattarella will seek to invigorate a new government, possibly by giving Mr Renzi’s Democratic Party another mandate under a new leader. Alternatively, he could appoint a technical government, possibly headed by the Senate Speaker, pending a general election in the spring. If there were a return to the old system, which habitually produced a coalition, this would increase the chances of Mr Renzi sharing power with Silvio Berlusconi.
The world is going through a process of recalibration. Although Austria has thankfully spurned the chance to vote for its first far-right head of state, the danger of a populist far-right party taking power within the next 18 months remains high. In Italy, we may be facing a rocky period of economic and political instability for some months ahead. This could yet threaten to blow up the European dream.
A year of political shocks ahead could reverse the hope in the eurozone that the worst is behind it. A surge in support for populist and nationalistic movements threatens the prosperity, values and collective security of Europe.
The new year will be marked by uncertainty with the inauguration of Donald Trump as US President, Britain’s triggering of Article 50 and crucial elections in the Netherlands, France and Germany.