BRUSSELS – Europe has just endured two more difficult tests. While Austrian voters rejected the possibility of the European Union getting its first far-right head of state, Italians delivered a stinging rebuke to their government – and opened the way for populist forces to come to power. Add to that a Brexit that has yet to unfold and the eurozone’s still-lackluster economic performance, and the survival of the common currency is far from guaranteed.
With the euro taking the blame in recent years for Europe’s many economic travails (from a double-dip recession to a slow and uneven recovery), nationalist, Euroskeptic, and populist political movements have gained ground. Austria has sidestepped their advance, but Italy may not.
Prime Minister Matteo Renzi’s decision to make good on his promise to resign if voters rejected his government’s proposed constitutional reforms has thrown Italian politics into disarray, and an early general election is likely. At a time of substantial economic challenges – Italy’s output has been stagnant for a decade, and its public finances remain precarious – the populist Five Star Movement, which has pledged to hold a referendum on continued euro membership, may well tempt voters.
If the eurozone’s breakdown is to be avoided, Italy – indeed, the entire currency area – urgently needs an economic boost. US President-elect Donald Trump may be just the person to deliver it.