Insight
Italy’s referendum: Much ado about little by Luigi Scazzieri 28 November 2016
On December 4th, Italians will vote in a referendum on constitutional reforms. Despite widespread fears, Italy’s political and economic stability is unlikely to be jeopardised even if voters reject the reforms. Political stability in many European countries is under threat from populism. One exception up to this point has been an unlikely contender: Italy. There is of course an Italian brand of anti-establishment politics embodied in the Lega Nord and the 5 Star Movement. But so far, Italy has resisted the temptations of populism, despite economic hardship and the migration crisis. Policymakers and investors fear the upcoming referendum might change that, and yields on Italian government bonds have risen. Prime Minister Matteo Renzi, who initiated the reform, has repeatedly said that he will resign if he loses the vote. But despite the possibility of him resigning, the constitutional referendum does not pose a major threat to Italy’s relative economic and political stability. The constitutional reform aims to streamline the legislative process and give more powers to the government and the lower house of parliament, the Chamber of Deputies. The main change is turning the Senate from a directly elected upper house into a largely consultative body representing Italian cities and regions. The reform would also increase the powers of central government vis-à-vis regional and local authorities. The reform is closely connected to the new electoral law for the lower house, approved in 2015. This new electoral procedure gives 55 per cent of seats to the party with the largest number of votes, and is the first part of Renzi’s institutional reform package, with the constitutional reform the second. Supporters of the constitutional changes argue they will lead to a stronger executive based on more stable majorities in parliament, and that this will facilitate the economic reforms needed to boost growth, employment and eventually reduce Italy’s public debt. If Italians approve the reform, Renzi’s position would be strengthened and he may be tempted to hold elections before the scheduled end of the parliamentary term in 2018 to cement his majority. He would CER INSIGHT: Italy’s referendum: Much ado about little 28 November 2016
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