As Italy hits the polls it may well cripple the EU and serve a boost to Brexit
TOMORROW will be another nervous day in the Chancelleries of Europe.
Voters in Austria and Italy go to the polls and could plunge the EU into a political and economic crisis.
In Austria, the candidate of a truly far-right party — its first leader was a former SS officer — could win the presidency.
Victory for Nobert Hofer of the Freedom party would show that the extremist forces that the European project was meant to crush are now on the rise, in part because of the EU’s failings.
When the Freedom party entered into a coalition government in Austria in 2000, the EU felt confident enough to impose sanctions on the country. There’ll be no such confidence if Hofer wins the presidency this time.
But it is the Italian referendum that could produce the most immediate consequences.
If voters reject the Italian Prime Minister Matteo Renzi’s proposed constitutional changes, as the polls suggest they will, Renzi has — repeatedly — said he would resign.
A referendum defeat and Renzi resignation would be seen by the markets as proof that Italy is incapable of reform. The IMF is already predicting it will take the Italian economy until the middle of the next decade to return to where it was before the financial crisis.
This sense that Italy is destined not to sort itself out would, in turn, heap more pressure on Italy’s already struggling banking system.
Italian banks have a whopping 286billion euros worth of bad loans. If Italian banks start falling over, the Eurozone would be plunged into crisis.
Equally, if Renzi loses, resigns and early elections are held next year, the anti-Euro Five Star Movement has a decent chance of coming to power. The election of the Eurozone’s first anti-Euro government would call into doubt the currency union’s future.
If the Italians vote no on Sunday, that will have consequences for Brexit. London is, ironically, the Eurozone’s financial and banking capital. If the Eurozone is under pressure, then even the EU would think twice about erecting barriers between it and its financial and banking capital.
This might lead to a better deal for Britain’s financial services than people are expecting.
But if the British Government is to take advantage of this opportunity, then it has to know what it wants out of the Brexit talks. At the moment, though, the Government is still negotiating with itself.
One of those who attends the Cabinet’s Brexit committee tells me that it is far too obvious which side of the referendum campaign ministers were on whenever they speak.
The committee is, I’m told, split between Remainers “who treat it as damage limitation” and Brexiteers “who say it will all be fine”.
Britain not knowing what deal it wants also means it can’t enlist allies for its position. I understand a group of foreign ministers from friendly EU countries recently attempted to find out what Britain was aiming for on financial services so that they could try to grease the diplomatic wheels. But they left the meeting with no clearer idea than before.
To make a success of Brexit, the Government must know what it wants out of the exit talks. It also must view Brexit as an opportunity to be seized, not a damage limitation exercise.
On Thursday, an unpopular left-wing leader accepted he was leading his party to electoral oblivion and so stood down to allow his party to pick a candidate with a better chance of winning. Sadly, for Labour MPs, it was François Hollande, not Jeremy Corbyn.
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Dangers of Boris bashing
A group of EU ambassadors leaking a story to try to make their host Foreign Secretary look bad is not very diplomatic, but that’s what happened to Boris Johnson this week.
I understand that several of the ambassadors involved have called Boris Johnson to say they were taken aback by the story as he didn’t say he supported free movement, as was claimed.
But this incident shows the dangers of his Cabinet colleagues publicly taking the mickey out of him – it suggests to foreign governments that they don’t need to take him seriously and can join in the Boris bashing.
This is why, from the Prime Minister down, the Government should be trying to build him up on the world stage, not take him down a peg or two.
One Cabinet Minister tells me that the mockery and the briefing against Boris is a mistake because if it carries on he’ll eventually respond by going off the reservation, by making clear that Brexit won’t mean Brexit if Britain is still inside the customs union.
Limited Strategy
The Liberal Democrat strategy of turning themselves into the Ukip of Remain had its first success on Thursday with their defeat of the Brexiteer Zac Goldsmith.
For a party that only won eight seats and eight per cent of the vote at the last general election, it is a strategy that makes sense.
It will help them win in heavily pro-Remain constituencies such as Richmond Park, the 28th most pro-EU one in the whole of Britain, where they are up against a Brexit Tory.
But it isn’t going to see them sweep to victory nationwide.
Indeed, the strategy won’t even see them take back all their old seats – their former strongholds in the south west voted for Brexit.
When it comes to the national mood on Brexit, all this by-election tells us is that those places which were strongly opposed to it back in June, still are.
Trump signalling the way
Donald Trump’s nomination of General “Mad Dog” Mattis as Defence Secretary is another sign he wants to scrap the Iran nuclear deal, or, at the least, aggressively enforce it.
There are those in the foreign policy establishment who think that Britain should expend diplomatic capital trying to persuade Trump to change his mind on this.
But given the flaws in the deal and the hostility of Congressional Republicans to it, this would be a waste of time.
It would be far better for the UK to focus on the US’s commitment to Nato, which Trump is alarmingly ambivalent about, and US-UK trade talks.
May miss her own deadline
Next week the Supreme Court hears the Government’s appeal against the High Court ruling that parliamentary legislation is needed before the PM can trigger Article 50.
Ahead of the hearing, the Attorney General Jeremy Wright updated the Cabinet on the Government’s position. But, I’m told, what made Theresa May blanche was Justice Secretary Liz Truss warning that the verdict might not come until the end of January.
If the Government loses the case, as even most Eurosceptic legal experts expect it to, this would give May just two months to get the necessary law through both houses of Parliament.
If she couldn’t do that, she’d miss her self-imposed deadline of invoking Article 50 by the end of March.
Interestingly, Truss also felt it necessary to remind the Cabinet not to criticise the judges once the verdict was in.
— James Forsyth is political editor of The Spectator.