Crisis ? What Crisis ? ……..Supertramp 1975 !!!
Italians will goes to the polls on Sunday, December 4, to vote on whether to back reforms of the country’s constitution.
Why is the referendum important?
Firstly, the reforms are significant, so significant, some have argued, that if they are approved by the electorate, they would represent the birth of Italy’s third republic.
Secondly, Italian PM Matteo Renzi has staked his future on the vote, saying he would quit if he is unable to secure a victory for his constitutional changes. That could have wider implications for the European Union, because it would open the door to the possibility of the Eurosceptic Five Star Movement getting into power, who have made no secret of wanting to hold a referendum on Italy leaving the Euro.
The reforms propose drastically diluting the power and size of the senate and replacing elected senators with representatives from the regions.
The other main pillar of the reforms is to rebalance the power of the regions, bringing more areas under the control of central government and removing any duplication.
So, What happens if Renzi does quit?
The paradox is a referendum that is seeking to bring stability of government to notoriously volatile Italy could in fact plunge it into a fresh crisis.
As it stands, Italy’s unemployment rate was 11.4 percent in August and has debts of 132.7 percent of GDP, the second highest level in the EU, after Greece.
Italian banks have massive bad debts, and may need a significant injection of funds. Italy is in a vulnerable position.
This referendum could lead Italy to another, that being, should Italy remain in the “Euro”?, which in turn, could have a contagion effect on the entire Eurozone.
This does not bode well for the Eur/Usd. Sub 1.0000 prices should follow. The USD is King for now.
It’s building folks, Brexit, U.S. Election Surprise, Italian Referendum and Frexit. Hold onto your hats, future volatility is a given, which in turn creates opportunities.