Prime Minister Matteo Renzi has said that a victory in the poll would end Italy’s questionable political system which has prevented any government completing a full term since the Second World War.
This may actually be part of the shift in politics coming in Italy. Nonetheless, a defeat will mean the end of the line for pro-Brussels direction of Italy. This referendum is all about changing Italy’s 1948 republican constitution which is legally required for popular consent.
This is a major political gamble for the pro-EU center-left government akin to BREXIT. The opinion polls are showing many of the 50 million voters are undecided and the “No” camp gaining momentum in what will be a very close campaign. Support for opposition parties who want to leave Brussels have been certainly emboldened by Britain’s historic decision to leave the EU which is growing and the battleground will be this referendum.
Renzi may be forced out as was the case with David Cameron. Italy’s highest court gave the green light to a referendum that Prime Minister Renzi says will either guarantee political stability with staying in the EU or he will resign if voters do not approve the constitutional changes he hopes for. The high court validated the more than 500,000 signatures required for the referendum. Now, the government has 60 days to set a referendum date which may come in November or as late as December. The referendum is most likely going to be held after parliament approves the 2017 budget, a draft of which must be presented by Oct. 20th, 2016 and approval by both houses would take about a month.
The protracted political uncertainty is a cloud hanging over all of Europe. It has been the mad rush into Germany 10-year paper at negative rates showing that people are just parking money. This is not a question about making a return. They are buying the German paper assuming the euro will break and they will get Deutschemarks once again.
The actual reform proposed by this referendum would shrink the upper house, cutting the number of senators to 100 from 315, and stripping it of powers over the budget and its ability to bring down a government. Instead, it would have oversight of local, rather than national, issues. Renzi supports this to prevent the upper house from stopping his agenda. It would increase the powers of the federal government while diluting the 20 regions with respect to national policy. This will be accompanied by a new two-round voting system for the lower house. Here, Renzi says the changes should finally make Italy a governable country.
The rising opposition parties are very anti-immigrant. The Northern League in particular, warns that Italy is being stripped of any democratic checks that were designed to prevent a strong national government and the rise once again of some political strongman like Fascist dictator Benito Mussolini. Really?
This is becoming the hot topic and this is a vote on the future of Renzi and Europe.
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Livio S. Nespoli has been a broker, registered investment advisor, and financial publisher since 1985.