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Italian voters will go to the ballot boxes on 4th December to vote on reforming the Italian constitution. The latest polls indicate that the bill could be rejected which could lead Prime Minister (PM) Matteo Renzi to resign from office and risk pushing Italy back into crisis. With elections scheduled to take place in France and Germany next year, yet another anti-establishment vote will lead to further questions about the stability of the eurozone project.
The bill proposed is designed to streamline Italy’s overly bureaucratic government. If successful, it will be the first major shake-up of Italy’s constitution in 70 years and will devolve power from the Senate whose seats will shrink from 315 seats to 95. This would see significant power shifted from Italy’s regional areas to the government and should make it easier to pass legislation such as reducing public expenditure.
PM Matteo Renzi has gone on record stating that he will resign if his bill fails. And the latest polls do not auger well for the PM. Out of 42 polls conducted by 15 separate agencies since 21st October, every poll has the “No” camp in the lead with the margin increasing since Donald Trump’s victory.
Demos & Pi opinion polls adjusted for "Won't vote" category as of 30/11/2016
Source: Demos & Pi
However, there is an elevated portion of ‘undecided’ voters which makes the polls unpredictable. And as we have learned from the Brexit referendum and the US presidential election, polls cannot always be trusted.
As we know from our own experiences in Ireland, constitutional changes are often complex and littered with legal technicalities. Such issues often make it difficult and time-consuming for the voters to understand.
The second section of the Italian constitution stipulates that both Houses of Parliament, the Chamber of Deputies (lower chamber) and the Senate (upper chamber) wield equal amounts of power. The bill proposes to alter the symmetrical powers currently held by the two Houses by reducing those of the Senate.
This essentially means that the government will no longer require the Senate’s vote of confidence or approval to pass ordinary laws. The reformed Senate will act as a liaison between the regions and the central government. The Chamber of Deputies will retain its authority and become the main supporting House to the government.
Ever the political entrepreneurs, the opposition have leveraged this knowledge gap to pit a large portion of the electorate against Renzi and frame the referendum as a vote on Italy’s membership of the eurozone.
Italy desperately needs to make structural reforms to its economy. Unemployment is still over 11% and youth unemployment is close to 40%. On top of this the referendum comes at a time when Italy’s banking sector is battling a crisis and sovereign debt stands at around 133% of Gross Domestic Product (GDP). Having only come out of its longest recession since World War II, Italy’s economy needs a shot in the arm to return to sustainable growth.
Considerable structural reforms such as credit restrictions, sovereign policy and labour market alterations are required to reform the economy. And it’s fair to say that Italy has lagged most of their European counterparts in implementing such reforms since the financial crisis. This, Renzi argues, can be partially attributed to the high level of red tape that exists within the current Italian parliamentary system.
The opposition to the bill, which mainly comes in the form of the Five Star Movement Party (5SM), centres on the fact that the proposed alterations will provide the government with too much power by shifting legislative authority to a single House. The very situation the bicameral system was installed to prevent. Other critics argue that the proposed structural changes to the Senate are unclear and that they will result in more legislative complexity instead of less.
If Renzi is successful, it will be seen as a vote of confidence in his ability to lead the country. It should also provide the Democratic Party (PD) with a strong platform to retain their position in government in the 2018 general election. Most importantly, it will allow the Italian government to implement the reforms required to help rejuvenate the economy.
In the event of the “No” vote prevailing, the initial backlash will focus on Renzi’s position and he may be pressured into resigning. Attention will then quickly turn to the implications for Italy and the European Union (EU).
There are a few potential outcomes. The worst case scenario from the EU’s perspective would ultimately lead to Italy’s exit of the eurozone. This could manifest itself if the bill is rejected, Renzi resigns, the President of the Republic calls a snap election and 5SM is elected into government. Once in government it would be almost certain that the 5SM would hold a referendum on Italy’s participation in the single currency. This scenario is unlikely to materialise but given recent global economic events and growing euroscepticism, it cannot be ruled out.
The more likely outcome following a victory for the “No” vote would be for the PD party to remain in government until the next general election in 2018. If Renzi resigns, the party may be forced to operate in a more diluted coalition. If Renzi decides to stay in office, the government will carry on as before albeit under increased pressure. Either way the government will continue to be restricted by the parliamentary system. And political instability will almost certainly persist.