Tuesday, December 6, 2016

For Europe’s Unity, 2017 Will Be A Year Of Reckoning

Mainstream parties are feeling pressure from populist politicians, setting up votes next year in several core European nations that will help determine fate of open borders and the euro.

By Marcus Walker and Anton Troianovski 
The Wall Street Journal
December 6, 2016

Demands from the gathering forces of European populism range from erecting border fences to dismantling the euro. Some insurgent parties want greater fiscal leeway from Europe. Others want their money back from neighboring nations.

They share one thing: Their ideas would unravel the 60-year project of European integration.

These diverse anti-establishment forces have yet to win power in any of the European Union’s core countries. Even so, they are piling pressure on mainstream parties, pulling EU countries in different directions as their governments try to assuage a growing public conviction that Europe isn’t working.

A string of elections in 2017 will test whether the populist forces can beat mainstream politicians. A political revolt against Europe’s status quo that began in Greece and the U.K. will come to a head in France, Germany, the Netherlands and probably Italy. The outcome could eventually, if not immediately, determine the fate of the EU, with its open internal borders and common currency.

At the heart of the new European question, and of many national contests, lies disillusionment over the burdens of life in the euro and anger about a perceived loss of control over immigration. Sunday’s referendum in Italy and presidential election in Austria suggest Europeans are split between those who reject what the EU stands for and those who believe it needs change to survive.

“The only thing that unites Europe in this time is dissatisfaction,” said Caterina Pifano, a lawmaker for Italy’s 5 Star Movement.

The anti-establishment party’s demands include a nonbinding referendum on whether Italy should keep the euro. Such a move could spook financial markets and destabilize Italy’s fragile banking system, Ms. Pifano said. “The point,” she added, “is to press Europe to understand that there’s a problem. It’s not Italy, nor France—it’s that this Europe can’t go on.”

Other populist movements want to go further. France’s National Front wants to return to national currencies. It calls for an orderly process in concert with other EU nations, led by the Franco-German “motor,” to end the experience of the euro. It hasn’t laid out how that process would work, nor how to revive the French franc if Germany wouldn’t cooperate.

The National Front wants to renegotiate the EU’s founding treaties, not simply quit them. Its demands for change, including the return of France’s net contribution to the EU’s budget and restrictions on migration within the EU, would undermine the EU’s signature policies.

Party leader Marine Le Pen is a leading contender in France’s presidential election next year, though not the favorite. A win by her could be the fastest route to an EU unraveling by setting a collision course between France and Germany, where EU defender Angela Merkel remains favorite to win a fourth term as chancellor in fall 2017.

In most countries, a majority still supports membership of the EU and its currency. According to an EU survey in May, the most recent, 54% of Italians, 69% of Austrians and 73% of Germans want to keep the euro. Only about one in three, though, said they had a positive image of the EU.

The greatest long-term threat to the EU’s stability could be Italy, whose economy has failed to grow since the country joined the euro or to recover from the financial crisis.

Italians this weekend resoundingly rejected constitutional changes proposed by Prime Minister Matteo Renzi, who resigned on Monday. His failed plan was to streamline Italian politics to unlock economic changes European authorities view as vital for Italy’s viability in the euro.

Italy’s 5 Star Movement wants to shake up the EU, including by casting off its Germany-sponsored fiscal shackles. Italy’s anti-immigrant and regionalist Northern League, by contrast, wants to quit.

The bloc is incapable of changing, said Carlo Vettori, a Northern League politician from Bolzano in Italy’s mountainous north, where Europe was for decades seen as a model of good government for Italy to emulate. These days, governed by an elite caste of mutually blocking interest groups, “Europe has become more like Italy, instead of Italy becoming more like Europe,” Mr. Vettori said.

This Alpine region was a battleground in both of Sunday’s elections, which were fought over many of the themes that will shape Europe’s elections in 2017. North of Bolzano, the Brenner Pass linking Italy and Austria is a symbol both of Europe’s openness and of its threatened disintegration.

Fireworks, dancing, and Beethoven’s Ninth marked the moment here at 4,495 feet above sea level when Europe’s internal frontiers fell in 1998. Soon afterward, the euro swept away the currency-exchange kiosks.

Now, populists on both sides of the pass say the costs of common money and having no borders are too high. Italy is currently Europe’s biggest entry point for African and Middle Eastern migrants. Many, Germany-bound, cross the pass on foot.

Local innkeeper Gerhard Meyer has turned against the open Europe that once made him a celebrity. He was the first East German to cross to the West when Hungary cut open its fortified border with Austria in 1989. He later settled in the Austrian village of Steinach am Brenner, where his hotel caters to travelers who flood across the Alps.

“For me, it was like the Garden of Eden when the borders were opened in Europe,” Mr. Meyer said.

Now an Austrian citizen, he wants strict border controls at the Brenner Pass, to curb terrorism risk and stop migrants he describes as “money-seeking welfare tourists.” Like many in this region, Mr. Meyer voted for the candidate of the far-right, EU-skeptic Freedom Party in Sunday’s election for the ceremonial but symbolically important Austrian presidency. It lost but scored its highest-ever electoral support.

For Stefan Pan, a local Italian industrialist, the kind of border controls Mr. Meyer and the Freedom Party seek would be a disaster—“like bringing back the Berlin Wall.”

His company, Pan Surgelati, is a world leader in apple strudel. Much of the 20 miles of strudel his plant churns out daily is exported to Austria and Germany via the river of trucks flowing over the Alps. Populists fanning irrational fears risk rending Europe’s economic fabric, Mr. Pan said.

South of the Alps, unending economic pain since 2008 is the biggest source of disillusionment with the EU. Policies required before the European Central Bank would prop up Italy’s fragile bond market left Italians bitter at a eurozone they see as dominated by German interests and strictures.

As premier, Mr. Renzi lobbied the EU to allow Italy more breathing space, while also pushing labor-law and other changes urged by Germany and the ECB to make Italy more competitive. The 5 Star Movement led the campaign against his plan.

“Europe, high finance and [German Finance Minister Wolfgang] Schäuble wanted these reforms, because they would help Italy’s creditors push through unpopular economic measures and austerity,” said Paul Koellensperger, an internet entrepreneur and 5 Star Movement politician in Bolzano.

At the Brenner Pass, dashes of green paint on the asphalt mark the border between Austria and Italy. Abandoned apartments that once housed Italian customs officials stand opposite a shiny new mall. Inside, people from all over Europe mill around a display of photos from the past: soldiers, tollgates, the Nazi flag.

On Sunday night, relief among pro-EU Austrians was palpable after the center-left candidate for head of state, Alexander Van der Bellen,held off the Freedom Party’s Norbert Hofer. Yet even Van der Bellen supporters who gathered at a cultural center in Innsbruck said Europe needs a rethink.

Retiree Evelyn Kiss said the EU is dominated by “global business and big corporations,” echoing rhetoric used by populists of both the left and right. The answer, she said, is to reform the EU, not to topple it.

“The EU is like democracy,” Ms. Kiss said. “We need it, there is nothing better, but we must work at it.”

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