Complex Made Simple

Italy referendum: Step 1 to another Brexit?

* Italy referendum gets Italians to votes today on proposed changes to their constitution

* Changes proposed by government and spearheaded by PM Matteo Renzi

* Referendum also proposes changes in parliamentary system and centralisation of power across the country

* Critics worry reforms will give government too much power over parliament

* If referendum fails, populist, anti-establishment Five Star Movement may gain more power


Citizens of Italy vote today (Sunday) on proposed changes to their constitution, in a referendum whose outcome will have local, regional and global impact.

The reforms to the constitution, which has been in place since 1948, are proposed by the government and spearheaded by Prime Minister Matteo Renzi.

The government is laying out the referendum as it failed to gain two-thirds of parliamentary votes required to change the constitution. The referendum also proposes changes in the parliamentary system and the centralisation of power across the country.


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However, critics of the referendum worry that reform will grant the government too much power over parliament, an imbalance that could threaten democracy in the country.

But here is why those residing in the MENA region should care about the outcome of this referendum, taking place in Italy.


Economic consequences

This referendum has been compared to Brexit, the UK’s vote to leave the European Union, which was held earlier this year. While no outcome of Italy’s referendum will lead to the country leaving the Eurozone, it will have an impact on the local markets that will echo around the Eurozone and the globe.


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If the reforms are approved, the international community “would also be relieved by the fact that the third-largest economy in Eurozone and among the ones with the largest public debts in the world – would be managed by a steady hand,” Matteo Garavoglia wrote for Brookings Brief.

Conversely, if the referendum fails, “Italy could become yet another source of disability in Europe,” Garavoglia added.

Hence the referendum is also seen as a test of popularity for Prime Minister Renzi, who promised the he will resign if the referendum fails. The Pro-EU Prime Minister is seen by international markets as an official looking to modernise Italy and save its banks, the weakest in Europe.


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Another Brexit?

If the referendum fails and Renzi does step down, observers and analysts speculate that this would open up the way for the populist, anti-establishment Five Star Movement to become stronger and form a government.

The movement, which began in 2009, is led by former stand-up comedian Beppe Grillo. In the 2013 elections, it became the second most voted-for party despite having no history in national governance and service.


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This comes as populist movements gain strength across Europe and the Westerns world, evidenced by the unexpected win of Donald Trump in the US presidential race, the appointment of Theresa May as UK’s PM after Brexit and the headlines made by France’s Marine Le Pen.