Fear of Itexit strikes Europe

Political turmoil has erupted in Europe as Italian Prime Minister Matteo Renzi proposed constitutional reform failed in a referendum due to the opposition of populist (claiming to represent the common people) parties. With the pro-EU prime minister having vowed to resign immediately to accept the responsibility for his defeat, it is highly likely that Italy might leave the EU (Itexit).

Mr. Renzi of the center-left Democratic party proposed the legislation envisaging to reduce the number of Senators to deal with the high-cost and low efficiency issue and the constitutional reform plan was rejected in the referendum on Sunday local time with 40.9 percent voted “yes,” while 59.1 percent voted “No.”

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Mr. Renzi accepted his defeat and said that he would convene the cabinet meeting on Monday and immediately deliver the resignation letter to the president. His resignation came after two years and nine months since he was elected as the prime minister in February 2014. He was the youngest person ever to become prime minister.

Fears of the rising populism that led to the Brexit (Britain's withdrawal from the EU) swept Italy along with Donald Trump’s win the U.S. presidential election in November and are now spreading across the entire Europe like a domino effect. Chances are that the far-left party the Five Star Movement, which is spearheading a Eurosceptic campaign, can win an early general election next year. The right-wing Northern League, which has the third-highest approval rating, also insists to leave the Eurozone. Mr. Renzi’s defeat led anti-EU populist parties to be on the stage in next year’s presidential elections and general elections in France, Germany, and the Netherlands.

Due to the political turmoil of the Europe’s third largest economy, the euro crashed to a 20-month low. Concerns over chain reactions of bankruptcy of unstable Italian banks are increasing.

In Austria, independent left-wing candidate Alexander Van der Bellen, a child of refugees, swept 53.3 percent of the vote against 46.7 percent for his rival Norbert Hofer, the Austrian Trump in the presidential election on the same day of Italy’s referendum. Hofer’s attempt to become first far-right president in Western Europe since the end of World War II went in vain.

Jung-Min Dong ditto@donga.com