Since Brexit is the biggest problem facing the UK, it is easy from this side of the Channel to imagine it is also the greatest challenge facing the European Union. It is not. EU leaders have yet to find lasting fixes to structural weaknesses in the single currency. Continental politics is plagued by xenophobic nationalism, which is intimately connected to the absence of consensus on how to deal with mass migration from beyond Europe.

This has all been complicated by the absence of a government in Berlin since elections last year. So today’s announcement of a provisional “grand coalition” deal between Angela Merkel’s Christian Democrats and the Social Democrats, led by Martin Schulz, amounts to progress. But the restoration of something close to business as usual in Berlin is cause for temporary relief, not celebration. The SPD membership can reject the deal. Collaboration with Mrs Merkel has bleached the German centre-left of its dynamism and identity. Mr Schulz was satirised in the election for the lack of a distinctive message. (He is standing down as party leader to become foreign minister.)

SPD blandness combined with the air of fatigue about Mrs Merkel’s 12-year incumbency as chancellor has allowed the far-right Alternative für Deutschland (AfD) to grow into a significant force. The AfD may now be the largest opposition party in the Bundestag, a situation that would have been unthinkable only a few years ago. A stale-looking coalition will be vulnerable to the charge that power has been sewn up by established elites against the interests of the people. Germany’s terrible history has served as cultural inoculation against extreme nationalism, but there is evidence that the immunity is wearing off.

The SPD membership could still reject coalition, hoping to find renewal in opposition. But at least in government the party will control the finance and foreign ministries – substantial prizes. Whether it has more impact than last time is uncertain. Mrs Merkel is practised in outmanoeuvring junior partners.

At the wider European level, the formation of a German administration should, in theory, unlock single currency and wider EU reforms. But there are competing accounts of what that requires in Brussels, Berlin and Paris. Mr Schulz also has a greater appetite for integration than Mrs Merkel. Meanwhile, the balance of European power could be upset by elections in Italy, the third largest eurozone economy, on 4 March. Rome is an unpredictable force in EU matters because its politics and finances are a mess. There is growth but not at a rate likely to reward the centre-left coalition of prime minister Paolo Gentiloni. Populists and ultra-nationalists are polling well. The campaign has involved relentless vilification of migrants. Italy’s position as the landing point for those crossing the Mediterranean has made the issue even more toxic there than elsewhere

Capitalising on discontent, Silvio Berlusconi, the 81-year-old media tycoon and convicted tax fraudster, has launched a comeback. His dodgy past legally excludes him from a return to the prime minister’s job, but he could still wield power in a coalition. It is a dispiriting prospect, not least because many European leaders have greeted his return to the scene with weary resignation, bordering on nostalgia. For all his flaws, his venal xenophobia is milder than the virulent strain across the Atlantic. It speaks volumes about the state of western democracies that the bounds of moderation are defined as marginally less obnoxious than Donald Trump.

Britain cannot avoid these problems by virtue of its decision to leave the EU. Europeans are still our neighbours, allies and principle trading partners. While each country’s domestic politics have unique difficulties, a common feature is a void where there should be simple, compelling reasons to reject nationalists. There are not enough bold policies and no electoral strategies to compete with the empty promises and cultural menaces of populism. That was the failure of Britain’s pro-Europeans over many years and a heavy price is being paid. Moderate politicians in the rest of the EU look no closer to a winning formula.