Friday, November 18, 2016

Italy and Austria elections keep Europe on edge

Fears rise about populist wave following Brexit vote and Trump victory

Nationwide votes in Austria and Italy on December 4 are causing palpable anxiety in Europe that, as in the Chicken Licken folk tale, this will be the day when the sky starts falling.

Austria will re-run its presidential election, which in May a far-right candidate came within a whisker of winning. Italy will hold a constitutional reform referendum on which Matteo Renzi, prime minister, has staked his political prestige.

Alarmists fear that victory for the Austrian far right and defeat for Mr Renzi will signal that Europe, no stranger to anti-establishment insurgencies, is being submerged by a populist tide washing in from the Atlantic. This tide swept Britons in June into voting to leave the EU and last week lifted Donald Trump to the US presidency.

In the context of rising populism, Austria’s election is arguably the more worrying event. No European democracy has elected a far-right head of state since the second world war. The symbolism of such a breakthrough in Austria, annexed to Nazi Germany from 1938 to 1945, would be immense.

Yet financial markets seem more unnerved by the prospect that Mr Renzi will lose the referendum, as opinion polls suggest. They fear political drift that will hobble efforts to stabilise Italy’s fragile banking sector. Those risks are real, but a defeat for Mr Renzi might be a blessing in disguise.

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