On Sunday, Italian voters rejected the constitutional reform proposed by Prime minister Matteo Renzi. The reform was aimed at simplifying the institutional structure of the country and fasten legislative procedures. On Sunday night, shortly after the release of the first exit polls, which showed the clear defeat of the reformist front, Matteo Renzi announced that he would resign. However, on Monday the Italian President of the Republic, Sergio Mattarella, asked Renzi to delay its resignation in order to guarantee the approval of the budgetary law for 2017.

The results of the Italian referendum initially sparked fears about the integrity of the Eurozone. However, after a first dip, the common currency reacted positively to the political shock. Many analysts argue that it is likely that new general elections will be held in the early months of 2017. In that scenario, the Five Star Movement (M5S), led by former comedian, Beppe Grillo, could win. According to many, the political success of the M5S could as well pave the way for a referendum on the euro.

Meanwhile, many political leaders all over Europe reacted to the results of the referendum and to Renzi’s resignation. The leader of the French far-right Front National said that “the Italian result bears a huge lessons for France” on the perils of EU-driven austerity policies. In a similar vein, Alexis Tsipras, the Greek Prime Minister, called the member states of the European Union to show more solidarity. The German Minister of Foreign Affairs, Walter Steinmeier said that Italy’s “no” vote is concerning. Moreover, according to some part of the German press, with Renzi’s step back, Angela Merkel lost an important ally on the European stage.

The Italian referendum was not the only key development in Europe over the weekend. In Austria, on Sunday, the former Green party member, Alexander Van der Bellen, won the Presidential elections against Norbert Hofer, the leader of the right-wing Freedom Party of Austria (FPÖ). Although many politicians in Europe breathed a sigh of relief after the success of Van der Bellen, the share of votes gained by the FPÖ (46 per cent) confirms that right-wing populist parties are gaining across Europe. On Monday, the Vice-president of Socialist and Democratic group at the European Parliament (S&D), Enrique Guerrero, admitted that social-democrats share a great part of responsibility for the rise of populist forces across the Continent. Guerrero also said that the S&D group should avoid “an exclusively economic approach that sidelines social rights”. “The working class has become the main electorate of populist parties”, he added.

Greece is back under the spotlight as international creditors and Greek authorities met to discuss the evolution of structural reforms. On Monday, the Eurogroup gathered in Brussels with the aim of closing the second review of third bailout program. However, because of missing details and a lack of effective reforms, no staff agreement could be reached on time. As the President of the Eurogroup, Jeroen Dijsselbloem said after the meeting, the conclusion of the second review will be delayed to early January at this point.

Nevertheless, international creditors decided to ease-off Athens’ the debt burden by means of a set of short-term measures. These measures include granting Greece a longer period of time to repay its creditors – average debt maturity has been extended from 28 to 32.5 years. Klaus Regling, the Director of the European Stability Mechanism (ESM), said that “the concessions made to Greece, should help the country to raise its sustainability in the short-term”. Euclid Tsakalotos, the Greek Minister of Finance, claimed that the “economy will benefit from the decision immediately”.

However, the International Monetary Fund (IMF) remains sceptical about the prospects of the Greek economy. As reported by EUobserver, according to an IMF official who was present at yesterday’s meeting “although the Country underwent massive adjustments, its economy remains ever less sustainable in the long term”. Indeed, the IMF has been pledging for a nominal debt cut for months. Germany is said to not be willing to give in on any further debt relief yet. Moreover, according to the initial bailout agreement Athens is expected to reach a budgetary surplus of 3.5% by 2018. The numbers continue to be a bone of contention between Berlin and the rest of the Eurogroup. Wolfgang Schaüble is not willing to reduce the target, whereas many EU members states, as well as the IMF, would like to set a lower, but more realistic objective for the Greek government.


“I hope that in five years from now, the Eurozone won’t have as many members as today […] Greece should recover inside the European Union, but outside of the Eurozone. The Eurozone should shrink accordingly. Italy should stay as a member”.

Alexander Graf Lambsdorf, Vice-president of the European Parliament

Source: Die Welt, 06.12.2016


€50 billion

The amount that the European Commission would like to use as an expansionary fiscal instrument to revive the EU economy in 2017.

Source: El Pais, 5.12.2016

Photo Credits CC en.kremlin.ru

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