European Union leaders need to upgrade and update their ways to tackle the region's economic and political problems or face first further risks to the 28-country bloc's unity, Italy's Finance Minister, Pier Carlo Padoan, told CNBC.
Europe faces a series of crises of confidence: The U.K. is about to vote on whether to remain part of the EU, the region is split on how to handle the influx of migrants from the Middle East and North Africa, and economic growth in the euro zone remains stubbornly slow. Dissatisfaction at how the EU and its leaders have handled these problems has sparked the rise of euroskeptic and right-wing parties across Europe.
"Unfortunately many citizens are beginning to consider Europe part of the problem, rather than part of the solution," Padoan told CNBC at the Group of Seven (G-7) finance ministers' meeting in Sendai, Japan, on Saturday.
"Because they see persistent high unemployment, young people see little hope for the future in terms of job opportunities, and also threats to the welfare system. This can be reversed. I think it's a major responsibility of the policymakers in Europe to provide a viable alternative which is possible. Of course, economic strategy in Europe has to be upgraded, and updated."
The U.K. goes to the polls in June to decide whether to remain part of the 28-country EU or go it alone.
The referendum, called by Prime Minister David Cameron in response to calls to leave Europe from U.K. Independence Party (UKIP) and withing his own ruling Conservative Party, has sparked a series of warnings from bodies such as the International Monetary Fund and the Organisation for Economic Co-operation and Development that the U.K.'s economy would suffer outside the EU.
A so-called Brexit would cause both short- and long-term problems for the U.K., Padoan told CNBC.
"Going forward, if there's (a) Brexit, the U.K.will start negotiations with the EU on how to define relationships on a number of agendas, which will take some time, a few years I guess," he said.
"So this will add to uncertainty, and we know uncertainty has been a negative factor in explaining slowdown in investment and growth recently.
"In the longer term, I think this would be bad news for the U.K. and would be bad news for Europe. It also would spark off the risk of political contagion in other countries wishing to follow the Brexit example, given the wide-spread dissatisfaction with Europe we are observing now."