• Dutch vote may prompt copycat referendums, more EU gridlock
  • `Brexit' campaigners buoyed by people-versus-powerful message

Score one for the populists -- barely.

Dutch voters rebelled against a treaty between the European Union and Ukraine in a referendum on Wednesday, albeit on low turnout that fell short of the stampede that anti-EU campaigners hoped for.

The message, in an era of grass-roots rage against immigration, political elites and the economic inequality laid bare by the Panama Papers tax-dodging revelations, was that a mobilized minority can hijack the status quo. The outcome was cheered by anti-establishment forces across Europe, led by the “Brexit” camp which wants to take Britain out of the EU in a popular vote in June.

“It’s an EU-critical message,” said Holger Sandte, chief European analyst at Nordea Markets in Copenhagen. “It’s easy for the Brexit people to exploit the Dutch referendum.”

One likely follow-up: more referendums in more places. It took just 300,000 signatures, about 2 percent of the Dutch electorate, for a motley array of citizens groups to put Ukraine onto the ballot. In France, Marine Le Pen is promising referendums to pull out of the EU and euro currency in her campaign for president next year.

Handle With Care

The tool can be used by those in power as well, as long as they handle with care. Greek Prime Minister Alexis Tsipras staged a popular vote last year to win backing for his resistance to further cuts in the welfare state, only to crumble when threatened by Germany with expulsion from the euro.

Hungarian Prime Minister Viktor Orban, the EU’s harshest critic among the bloc’s 28 national leaders, is planning a referendum to shore up support for his hardline anti-immigration stance. But the politicking works both ways: on Wednesday, Hungary’s supreme court cleared the way for a referendum called by opponents of Orban’s 2014 decision to shutter retail stores on Sundays.

The setup varies across Europe. Germany eschews referendums because of Nazi-era abuses of democracy, while in Switzerland -- not a member of the EU -- they are a national pastime.

Veto Points

Dutch campaigners are already targeting the EU-U.S. trade pact now being negotiated. Hylke Dijkstra, a politics professor at Maastricht University, predicted more pressure across Europe for referendums on policies that are normally left to legislators armed with cost-benefit-analyses and impact assessments.

“What you see is more veto points in the policy process, a lot of euro-skeptic groups see this as a good opportunity to block progress, to create additional hurdles for policy,” Dijkstra said.

The Dutch vote turned on opposition to immigration that is the hallmark of populist movements in northern Europe, even though the EU-Ukraine treaty wouldn’t open the gates to Ukrainian workers or put the ex-Soviet republic on a path to join the bloc.

As is often the case with citizens’ initiatives in Europe’s parliamentary democracies, the question on the ballot paper wasn’t the question that voters answered. Europe’s referendums tend to play out as protests against whoever is in power.

Best Option

The margin of 61 percent to 38 percent was primarily a rebuke for Dutch and EU leaders, with Ukraine suffering the collateral damage. What happens next with the EU-Ukraine treaty will feed into the campaign getting under way for Dutch national elections in 2017.

Prime Minister Mark Rutte’s first, best option is to play for time. While pledging to respect the non-binding outcome, he predicted weeks of consultations with his cabinet, Ukraine and other EU governments -- possibly pushing a formal response out past Britain’s EU ballot on June 23.

There is pressure from both sides: the other 27 EU governments have ratified the Ukraine accord, the bloc’s best hope of prying Ukraine out of Russia’s sphere of influence. But Dutch politicians who let the Ukraine treaty go ahead as-is face punishment at the ballot box next year.

The traditional EU option would be to issue a communique, possibly backed by legislation, that rules out Ukrainian immigration or membership to assuage Dutch opponents. The bloc went that route in February when it offered U.K. Prime Minister David Cameron safeguards against EU overreach to pave the way for Britain’s in-or-out referendum.

The Dutch vote “affirms the crisis at the heart of democracy which we are now seeing across the West,” Tim Ash, head of emerging-market credit strategy at Nomura International, said in a client note. “The low turnout perhaps also reflects the disillusion with politics and the political process in the West, which is also very worrying.”

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