Referendum in Italy: not “Italexit”, but still critical

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Italians are voting in a referendum on Sunday that is being touted as the most important vote in Europe this year – bigger even than Brexit, the vote in which the UK opted this summer to leave the European Union.

Referendum Prime Minister Matteo Renzi has staked his political future on concerns over proposed constitutional changes that would weaken the Senate, strengthen the central government in Rome and, therefore, make decision-making more efficient in the EU’s third-largest economy. The proposal would also change the country’s complicated electoral system for the Chamber of Deputies and allow Rome to gain more power over the regions. Renzi says the changes are needed to streamline Italy’s government, but his critics, including members of his own center-left party, say the referendum is an attempt to seize power by the government.

Renzi’s proposed changes were approved by the Chamber of Deputies and the Senate earlier this year. But they failed to muster the required two-thirds majority in each chamber, prompting him to call for a referendum on the issue. Indeed, he was so confident the proposal would pass that he pledged to step down if voters rejected his proposed changes. But it has been a year of shocks for the political establishment in Europe (and even the US): after the success of the Brexit campaign, which defeated the better-funded “Remain” camp, the Italians seem ready to inflict a defeat at Renzi. Comparisons with Brexit abound. But Matteo Garavoglia, a nonresident Italian Program Fellow at the Brookings Institution, told me they were overkill.

“As is often the case with a referendum, people don’t vote on the issue itself,” Garavoglia said. “For most people it is, as so often, a vote for or against the government.” He added that the similarity between the two situations ended in the populist tone of the campaign in Italy, with “crass slogans that have nothing to do with the substance of the referendum project on constitutional reform”.

Indeed, Italy’s relationship with the EU is not in question. Italy was, after all, one of the founding members of the bloc, and most Italians still view membership favorably. “No Italian would seriously discuss leaving the European Union,” Garavoglia said. “It would be absolutely suicidal for Italy.”

Yet political developments in Europe this year have obscured widespread economic problems in the eurozone, many of whose 18 members have not fully recovered from the 2008 global recession. at risk – Portugal, Italy, Spain and Greece – was austerity, a prescription that stung those countries’ most vulnerable citizens. In the resulting political backlash, far-left and far-right populist movements gained ground, the establishment lost favor and political parties that had seemed safe across Europe since the end of the World War II were severely weakened. Amidst this, economic vulnerabilities remain. Italy, for example, is struggling with massive public debt – 130% of GDP – and a fragile banking sector where around 20% of loans are considered to be in trouble – problems that Renzi says he can solve if the Italians vote ” yes” in Italy. the referendum. If they vote “no”, it could trigger a period of political uncertainty and, therefore, economic uncertainty.

“If Italy were to enter a phase of uncertainty, with tottering governments, with a new government, and come under attack in the financial markets, that would be a huge problem,” Garavoglia said. “Not just for Italy, of course, but for the rest of Europe. Italy is simply too big to fail.

In the event of a “no” vote, Garavoglia says, Italy could expect to see a speculative attack on Italy in the bond market. But it is the political repercussions that could be more important. Several scenarios have been sketched out: The president would ask Renzi to form a new government; or the president would appoint a respected technocrat as interim prime minister to lead the election law and pass the budget for 2017. This could lead to instability and a general election that could propel the populist Five Star movement, which is leading in polls. , in power.

If Renzi wins and his constitutional changes are put in place, it would reshape modern Italy, giving more power to the central government, at the expense of the regions and the legislature. The repercussions would be felt far beyond Renzi’s tenure in Italian politics.

“The fundamental question that must be asked is: is Italy a sufficiently mature and sophisticated democracy to manage a concentration of power in the hands of the executive?” Garavoglia told me. “Are the democratic institutions strong enough to handle this or is it better to leave things alone? It is a country that has had Mussolini and fascism, and more recently, 20 years of Silvio Berlusconi.

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