The global focus on the upcoming "Brexit" referendum is warranted. A vote in the United Kingdom to leave the European Union would send political and economic shockwaves across the world. But regardless of how the British referendum goes, events in Southern Europe will continue to stress the European Union.
One of the most notable consequences of the European crisis is the rise of anti-establishment parties across the Continent. What began as a financial crisis some eight years ago soon evolved into economic and unemployment crises. Low economic growth and high unemployment bred popular mistrust of mainstream political parties and gave rise to new political forces that question traditional leadership. Over the weekend, several events in Italy and Spain highlighted the extent to which anti-establishment sentiment is threatening the political order in some of the eurozone's largest economies ahead of key votes in each country.
Italy's anti-establishment Five Star Movement won June 19 runoff municipal elections in the country's capital, Rome, and in Turin, one of the largest cities in the industrial north. Two candidates with little previous experience in politics, Virginia Raggi in Rome and Chiara Appendino in Turin, easily defeated their seasoned rivals from the ruling center-left. Though Prime Minister Matteo Renzi's Democratic Party managed to win in large cities such as Milan and Bologna, Italy's ruling party is losing support. After the vote, Renzi acknowledged that the municipal elections had been disappointing, and he was even forced to deny rumors of his resignation.
Winning Rome marks a milestone for the Five Star Movement, a party that enjoys relatively strong support but that so far governs only a handful of small and midsized towns. Managing Italy's chaotic capital will prove challenging. If the Five Star Movement falls short, its prospects at the national level will suffer.
Though the Five Star Movement's main focus has been criticizing mainstream political parties, it also has promised to introduce universal income support, cut taxes for small businesses and introduce tougher penalties for corruption. It shares its strong anti-establishment message with other European protest parties, but it lacks their anti-immigration agenda. (Most anti-immigrant votes go to the right-wing Northern League party.) It does, however, defend some Euroskeptic views: Party leader Beppe Grillo has promised to hold a referendum on Italy's membership in the eurozone if his party wins the general elections.
The Five Star Movement's strong performance June 19 serves as a warning to Italy's traditional parties. In October, Italy will hold a referendum on constitutional reforms approved by Parliament last year that would concentrate power in the lower chamber at the expense of the Senate. Renzi has said he would resign if the Italians vote against his reforms.
As the referendum approaches, the prime minister probably will seek to bolster his party's popularity with promises of greater public spending and tax cuts. This could once again put Rome on a collision course with the European Commission. It could also reignite doubts about the health of the Italian economy, especially since doubts about Italian banks have not completely lifted. Should Renzi lose the referendum, he may well keep his word and resign — something that would give rise to a head-to-head competition between the Five Star Movement, the Euroskeptic right and the Democratic Party.
Anti-establishment sentiment is also strong in Spain, where general elections will occur for the second time in six months June 26. Opinion polls show the left-wing Unidos Podemos (a coalition of Podemos and the United Left) gaining momentum. According to a Metroscopia poll published by El Pais on June 18, the ruling Popular Party of acting Prime Minister Mariano Rajoy would get 29 percent of the vote while Unidos Podemos would get around 26 percent. The previous election led to a fragmented parliament that no alliance could dominate to form a government. Polls suggest that the next election will yield a similar landscape.
This would put the Socialist Party (now in third place) in the awkward position of having to choose whom to support. If the Socialists were to support the Popular Party, their traditional rivals, they would likely lose credibility among their constituents. But if they were to back Unidos Podemos, the Socialists could be absorbed by the new center-left heavyweight. Greece offers an interesting precedent in this regard: In 2012, the center-left Panhellenic Socialist Movement party opted to enter a grand coalition with its traditional rival, the center-right New Democracy. The result was a dramatic drop in support for Panhellenic Socialist Movement and the consolidation of anti-establishment Syriza as Greece's main left-wing force.
Podemos, like the Five Star Movement, was born amid economic recession, rising unemployment and widespread mistrust of traditional politics. In recent months, the party has softened its position on several issues to increase its appeal to moderate voters. For example, Podemos no longer campaigns on the promise to renegotiate Spain's public debt. But it has promised significantly higher public spending and taxes on companies and wealthy citizens. The party has also promised to join forces with Portugal and Greece (which have left-wing governments) to pressure the European Union to introduce expansionary economic policies.
But Spain's main challenge right now is not simply a strong performance by Unidos Podemos. More important, the country risks entering another period marked by political uncertainty and fragile governments. And as in Italy, uncertainty about the British referendum has led to small increases in Spanish bond yields. A British vote to remain in Europe would temporarily calm markets, but political uncertainty in Spain and Italy could lead to renewed volatility — testing the European Central Bank's promise to do "whatever it takes" to protect the eurozone.
The Spanish elections in June and the Italian referendum in October will open the door to significant gains for anti-establishment parties. Although the Southern European parties are not as anti-European Union as their peers in Northern Europe, they oppose the austerity measures introduced by mainstream parties under pressure from the European Union and financial markets. Their growth confirms the gap between the policies deemed necessary for economic recovery and those actually demanded by the public.
Italy and Spain have recently returned to economic growth, and unemployment is slowly decreasing. But popular discontent with the mainstream parties remains, and parties that challenge the establishment will continue to play key roles for years to come. Meanwhile, Northern Europe is dealing with its own anti-establishment forces, which criticize several aspects of EU integration and in some cases want to sever ties with economies in the south. They, along with the anti-establishment parties in the south, will contribute to ongoing tensions between Northern and Southern Europe, making it ever more difficult for the two regions to find common ground.
