Even with the negative result of the referendum in Italy the world will not blow apart. (Probably)

Read few comments.

Questions:

1. What do you think will the result of upcoming referendum in Italy mean for the country, if negative and what will it mean if there will be a positive result?

2. And connected question, what is at stake for the EU in Italian referendum especially if the result will be negative, but also if positive?

Answers:

Erik Jones, Professor of European Studies and International Political Economy, Director of European and Eurasian Studies, Paul H. Nitze School of Advanced International Studies (SAIS), Johns Hopkins University

1. If the results are negative, then the world will not blow apart for Italy but the government will face some challenges.  The two most important of these will be to reform the electoral law for the Chamber of Deputies and to bolster market confidence in the Italian banking system.  Both Monte dei Paschi di Siena and Unicredit are looking to raise fresh capital.  A ‘no’ vote will heighten tensions in the market.  Whether or not Renzi remains as Democratic Party leader will depend a lot on the scale of the loss.  If he loses by only a little, he will probably stay.  If he loses by a wide margin, there will be calls for him to step down as leader of the Democratic Party.  I put that question before consideration of whether Renzi will remain as prime minister because the Democratic Party has an outright majority in the Chamber of Deputies.  In other words, the leader of the Democratic Party will be essential to form any post-referendum government.  The expectation is that Renzi will step down as prime minister; the issue is whether the President of the Republic, Sergio Mattarella, will reappoint him.  If the results are positive, then Renzi remains as prime minister.  The bond markets will strengthen as the uncertainty falls away.  And I expect a surge in equity prices as well.  That will not solve all the problems in the Italian banking sector.  MPS and Unicredit will still have to raise fresh capital in difficult markets.  But it will make life easier for the Italian banks.  It should also mean that the government stays in place through the lifetime of this parliament (although I have heard rumors that Renzi would like to call early elections in 2017).  The open question is how they will ultimately modify the electoral law for the Chamber of Deputies.

2. The implications of a negative vote for the EU follow from the implications for Italy.  I would expect there to be some tension within the single supervisory mechanism and between Italy and the European Commission as the Italian government looks for ways to restore market confidence in the banking system.  I would expect this tension to spill-over into the European Central Bank’s large-scale asset purchasing program through a widening of the spread between Italian and German bonds as well.  Finally, the EU will lose Renzi as a strong Italian leader.  Whether or not Renzi remains as prime minister, his influence at the European level will be diminished as a result of the loss.  If the result is positive, the EU will still face difficulties with the Italian banking system – but hopefully they will be diminished.

Carlo Bastasin, Nonresident Senior Fellow, Center on the United States and Europe, The Brookings Institution, Editorialist, Il Sole-24 Ore

The hype about the referendum is hugely exaggerated.

The substantial issue, subject to the referendum, is a relatively minor one. The constitutional change would not affect Italy’s responsiveness to Europe whether it is accepted or not.
What is going to change is Renzi’s personal leadership.

If he wins, he will be tempted to call for new elections in order to bring home a stronger result and consolidate his leadership in the Italian political landscape and in particular in his party. If Renzi loses, he would be summoned by the President of the Republic. Most likely he would decline forming a new government, given his weakness. Sergio Mattarella would attempt to form a new technical or institutional government as many times has happened in Italy’s recent past.

I hold for unlikely that Italy would be called to new elections after a victory of the “No”. In fact, two Chambers of the Parliament would be elected through an inconsistent electoral system.
Most likely, the new ad-hoc government would be asked to write a new electoral law and, given the necessary time, that would be consistent with calling new elections at the end of the current legislature in 2018.

Politically, a victory of the no would be comparable neither to the Brexit revolt against the establishment, nor to the Trump surprise. If possible, electors choosing the no-camp, prefer that nothing changes in the current institutional system.

Mauro Barisione, Associate Professor, Department of Social and Political Sciences, Università degli studi di Milano

1. In the short term, if YES wins Renzi’s leadership will be reinforced, of course, both at government and over the PD party. This would legitimise his position in office, which is starting to be weak. Then his government should last until 2018, when new elections are scheduled. If NO wins the situation is much less predictable, and an early election could take place in the spring 2017. The more general meaning is that the executive will be more effective if the constitutional reform is approved, but this looks very far from implying an authoritarian danger.

2. For the EU, the only change would be given by the Eurosceptic Five star movement getting to office, but this outcome does not depend directly on the referendum’s result. It depends rather on the electoral system which is not the object of the referendum but which will be probably modified anyway after the referendum.

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