Europe on the brink

With Italy's government facing possible referendum defeat, and the prospect of Marine Le Pen gaining office, officials in Brussels are fearful the winds of change are stirring, says John Redwood.

The last polls allowed before the Italian referendum point to a defeat for Mr Renzi and the government he leads. He wishes to concentrate power in a single chamber of the Italian Parliament and make it easier for him to direct reform and keep a majority in place for his proposals. He has promised or threatened to resign if the public do not back him. The idea behind his reforms is to achieve supply changes to help the Italian economy wrestle with the adverse monetary and fiscal background the Euro has delivered. Youth unemployment remains at crisis levels and general unemployment is far too high.

Meanwhile Italian banks remain at the centre of the Euro areas banking problems, with arguments over how much of the losses the bondholders and shareholders need to absorb, and how quickly the balance sheets of the weakest banks can be rebuilt. The absence of a strong government authority with clear views on how to resolve the banking troubles holds back sorting out the issues that afflict the Italian economy.

In France the centre right is close to choosing its champion for the forthcoming Presidential election. Polls and commentators take the view that either Mr Fillon or Mr Juppe will emerge as the new President, depending on who wins the run off contest for their party nomination next week-end. Current betting favours Mr Fillon. Most people expect a re-run of past elections when Mrs Le Pen does well in the first round, only to lose by a substantial margin in the run off against whichever establishment candidate has emerged as the best placed to take her on in the second round.

As always I do not intend to intervene in an election in another country, and have no personal preferences on who should win. By common agreement Mrs Le Pen is likely to be an important runner in the election so I will tomorrow look at the programme she is likely to adopt for her attack on the Presidency, as this has received little attention so far in the general press. Current polls show her losing to either Mr Fillon or Mr Juppe, but polls can shift during a campaign and polls in recent elections have not been very accurate.

There are general concerns in Brussels that the current wave of support for parties critical of international treaties and supranational government could garner more support in any EU country facing an election next year.