How Nationalism Undermines the

European Union

Analysis

The loss of economic prosperity has hurt European integration efforts. Member states will now push to devolve power from the European Union to the national level.

Nationalist and anti-establishment parties in member states will undermine fundamental EU policy.

EU institutions will be able to manage this trend in the short term, but the economy will force Brussels to reshape the European Union.

Over time, nationalism will trump European integration and governments will repatriate power for the first time in EU history, leading to the collapse of the union.

On May 29, 2005, French voters rejected a proposed European Constitution in a nationwide referendum. A week later, the Dutch followed suit. This clear rejection of greater European integration was an iconic moment in the history of the European Union. Although it came in the form of a nation-state constitution, the European Constitution would primarily have collated all previous EU treaties into a single document. This symbolic act, plus the granting of more legislative powers to Brussels, would have been a major step toward a unified Europe formulated in the wake of World War II.

A decade since the Dutch and French referendums, the European project is in its deepest crisis. The economic turmoil that began in 2009 and produced the eurozone crisis has awakened nationalist instincts that undermine pan-Europeanism. These centrifugal forces have always been present and, historically, led some members to opt out of certain initiatives. The key difference in 2015, however, is that nations will choose to backpedal on integration a first in EU history.

Integration and Sovereignty

The contest between nationalism and pan-Europeanism has been at the core of the European Union since it was first formulated in Rome in 1957. The union is an attempt to create a transnational entity out of a group of nation-states defined by different economies and political traditions, divided by a history of conflict. To unify these states, the European Union promised peace and economic prosperity. The resulting organization was a hybrid between a unified pan-European entity and a community of sovereign nation-states. In the ensuing decades, these competing visions have continued to clash, with nationalism succeeding several times in slowing the integration process.

The first move to slow integration came only three years after the foundational Treaty of Rome. In 1960, French President Charles de Gaulle made a bid to amend the treaty to reduce the European Commission's power and devolve authority back to national parliaments. The bid failed because of resistance from other member states, but it set a precedent for French resistance to transnationalism when integration undermined France's imperatives. In both 1963 and 1967, the French president vetoed attempts to fold the United Kingdom in the European Union out of fears that London, which France considered to be under Washington's influence, would gain too much power.

In 1965, de Gaulle opposed the European Commission's plan to accrue more power and the European Parliament's plan to direct the funding of the Common Agricultural Policy. France did not want to lose control of this policy because French farmers were the primary beneficiaries. De Gaulle's opposition sparked what came to be known as the "empty chair crisis." Paris withdrew from the European Council and all its committees, forcing the European Commission to abandon its bid because a French exit would have meant the death of the European project. European unification entered a long period of stagnation after that, caused in part by the economic downturn and oil price crisis of the 1970s.

In the 1980s, the European Union emerged from this slump in integration. An extremely efficient European Commission led by French Europhile Jacques Delors oversaw this period from 1985 to 1994. The end of the decade brought German reunification and the fall of communism, a sweeping historical change that the European Union used to push for more integration. During this period, the EU president also adopted measures such as the common euro currency in 1988 through the Single European Act and the 1992 Maastricht Treaty.

However, nationalism continued to hamper the European Union. British Prime Minister Margaret Thatcher targeted what she deemed Brussels' excessive powers. In 1980, she famously declared, "I want my money back," during a dispute with Brussels to adjust the United Kingdom's EU contributions. Though Thatcher left office in 1990, London built on this legacy by opting out of several EU measures in the early 1990s, including the Schengen area and the Economic and Monetary Union. As a result, European integration progressed but for the first time left some nations out.

The 2005 French and Dutch rejections of the European Constitution brought this slow progress to a halt. The opposition stemmed primarily from the symbolic nature of the document the public considered the term "constitution" to indicate an attempt to centralize power into a European state at the expense of national sovereignty. In 2007, most member states adopted the Lisbon Treaty, which replicated the text of the European Constitution line by line. In most member states, including the Netherlands and France, parliaments and not popular vote ratified the treaty. Many deemed the treaty a backdoor deal between national and EU leaders, feeding public anti-EU sentiment.

The Current EU Crisis

Shortly after the adoption of the Lisbon Treaty, Europe entered an economic crisis that completely derailed integration. With most EU member states in recession and unemployment rising, national governments became divided over economic policy. They have sorted into two camps: those who see crisis as the best time for painful reforms

and those who think stimulus should precede reforms. The economic downturn also revealed key problems caused by integration, most notably that the Economic and Monetary Union had made it impossible for member states to adjust their individual monetary policies.

The crisis opened opportunities for Euroskeptic parties and the local politicians who supported them. In May 2014, these parties won European elections in several member states, including France and the United Kingdom. More important, these victories increased nationalist rhetoric in domestic politics. But ultimately it is only member state governments that can force Brussels to return sovereignty. The May 10 Tory victory in British elections yielded promises from David Cameron for a referendum on EU membership and a renegotiation of the Lisbon Treaty. Euroskeptic parties, such as UKIP, and members of Cameron's own party that cleave to Thatcher's anti-EU legacy motivated such promises.

The Upshot of the Nationalist Surge

Unlike previous drives for national sovereignty, the current wave will actively bring power back to the states instead of simply exempting them from further European integration. Opt-outs were previously the norm. This time, the United Kingdom is directly challenging existing policies and EU principles. Cameron's renegotiations would call for permission to delay benefit payments to new migrants until four years after they enter the United Kingdom, new single market rules and a British exemption to the principle that members should strive toward an ever-closer union. All would be a step back from unification.

The question now is how these policies would be implemented. If negotiations between London and its European partners led to a new European treaty, popular pressure throughout the European Union would force governments to hold referendums. The European Union's current unpopularity would likely cause some member states to reject the new treaty. Moreover, Brussels is unlikely to accept a European referendum on a treaty that would undermine any of its power or achievements.

Thus, Brussels will not accept this possibility. Ensuing negotiations will result in more British opt-outs. But even if British negotiations avoid a near-term EU crisis and keep the United Kingdom in the organization, they will set a precedent for other states to push for increased sovereignty. The United Kingdom is not the only country where anti-establishment parties have emerged.

Meanwhile, EU member states will continue to struggle over the future of specific policies and core values. The Schengen area the open control of common borders in Europe is even under attack from France, a founding member. The opposition to Schengen targets the key EU principle of free movement of peoples. The principle of free trade could also come under fire, since many member states criticize German surplus as harmful to their national economies.

The anti-EU push will, however, provoke a reaction. Brussels, Berlin and other pro-European governments will probably try to establish an inner club of member states eager to promote integration. This division could lead to two tracks for EU membership, with some full members becoming entirely involved in the European Union while others become associate members that benefit from the free trade zone but would not have an influence on policymaking. The question of the French-German alliance will be at the center of this reshaping. France could be tempted to bring back the idea of a Mediterranean Union, leaving Germany in an alliance with Northern Europe.

Regardless of its shape, any restructuring of the European Union would require a new treaty. Current European economic optimism is only the result of short-term patterns a cheap euro and low oil prices. Structural reforms are needed to boost the economy in the long run, but member states are unwilling to implement them because they are unpopular with voters. Consequently, economic prosperity will remain Europe's main challenge. The longer Brussels waits, the harder it will be to convince some member states to engage in integration projects as the prospect of prosperity fades. In the meantime, the temptation of nationalism will influence member states to confront Brussels and repatriate power to their capitals, ultimately meaning the death of the European Union.

Analysis Editor's Note: The following is an internal Stratfor document produced to provide high-level guidance regarding May 31 Italian elections. This document is not a forecast but rather a series of guidelines for understanding and evaluating events, as well as suggestions for areas of focus.

On May 31, Italy will conduct elections in seven of its 20 regions and over a thousand municipalities. The vote will be a political test for Prime Minister Matteo Renzi, whose ruling Democratic Party is the most popular force in the country but is internally fractured. Elections will also indicate the status of the opposition, which is also divided and dealing with its own problems.

What to Monitor

The performance of the Democratic Party. The ruling party and the local forces that support it are expected to win in at least four regions: Tuscany, Marche, Umbria and Puglia. A surprise defeat for the Democratic Party in any of these regions would weaken the prime minister's position.

The situation in Campania. The vote in Campania, Italy's third most populous region, will be important to watch because the incumbent center-right politician Stefano Caldoro is in a tight competition with the Democratic Party's Vincenzo De Luca. De Luca's candidacy is controversial, because he has been convicted for abuse of office and may be forced to resign if a judge rules he is ineligible to retain his position under anti-corruption laws.

The contest in Liguria. In this northeastern region, dissident members of the ruling Democratic Party are presenting their own contender to compete against the party's official candidate. Should this alternate candidate perform well, dissent within the party would escalate. Additional tension within the Democratic Party could undermine the prime minister's plans for constitutional reform.

Friction within the center-left camp could further benefit the center-right, because Liguria is one of the few regions where the candidate representing former Prime Minister Silvio Berlusconi's Forza Italia party has a chance of winning.

The battle for leadership of the Italian right. The Euroskeptic and anti-immigrationNorthern League is already expected to retain power in Veneto, so a win in this region would not significantly change Italy's political landscape. However, the vote in the rest of the country will be a test for the Northern League, which is trying to build a broader power base. The election will also show whether Berlusconi's Forza Italia is still relevant. If the Northern League outperforms Forza Italia, it will consolidate the League's pre-eminent position in the right wing.

The health of the Five Star Movement. The protest movement led by comedian Beppe Grillo has lost popularity since its strong performance in the general elections of 2013. However, it remains Italy's second largest party, attracting around 20 percent of the vote. A strong performance by the Five Star Movement in the upcoming regional and municipal elections would give new life to a somewhat weakened party.

If the Democratic Party performs well May 31, the success will reinforce Renzi's leadership and help him move forward with his reformist agenda. However, if the center-right and party dissidents defeat the Democratic Party candidates in Liguria and Campania, the losses will lead to additional conflict within the government. The elections will also test the health of the opposition, as the Northern League, the Five Star Movement and Forza Italia are struggling to attract the protest and conservative votes. So far, Renzi has benefitted from a weak and fragmented opposition. A stronger-than-expected performance by any of the opposition parties could mark a turning point in Italian politics.

Source: https://www.stratfor.com/analysis/analytic-guidance-what-watch-italys-elections