Italy is once again facing a political crisis. Since the end of WWII Italy has had 63 governments. Paolo Gentilioni will lead the 64th government following the defeat of the December 4th Constitutional referendum and Prime Minister Matteo Renzi’s resignation. The resounding defeat of the referendum, with 60:40 in favour of the No vote has left Italy in a volatile situation, which could plunge Italy and the Eurozone over the precipice.
So why is the result of the Italian referendum so important for Europe? Firstly, Italy is a founding member of the EU and as a founding member of the EU the current crisis in Italy impacts the credibility of the euro and the EU itself. Secondly, it is the third largest economy in the Eurozone.
The political and economic ramifications of the Italian referendum conjure a series of questions for forecasters. Will there be early elections? Will there be an Italian banking crisis? What is the future of the Euro and the European Union?
Populist movements in Italy and across Europe have jumped on the Italian political crisis, using the result of the referendum as a de-facto vote on the future of the European Union. The Five Star Movement Party in Italy is pulling these populist strings. Whilst a general election must be held before May 2018, the Five Star Movement and other opposition parties are pushing for an election to be held earlier. The only obstacle to an early election push, is that electoral laws must be reformed under a new government before they can occur.
Foreign Minister Paolo Gentilioni has been picked as the new Prime Minister of Italy to lead the caretaker government after Matteo Renzi fell on his own sword following the referendum defeat. The caretaker government is paramount for the rescue of Italy’s ailing bank, Banca Monte dei Paschi di Siena, which is seeking recapitalisation plans. Without the successful rescue of the bank, a contagion of economic chaos could sweep throughout the eurozone, adding fuel to euroscepticism. Gentilioni is also mandated with reforming the electoral laws so an early election can be called.
There could be more shocks and waves to come in Italy and Europe. The banks are hanging on by a thread as an economic crisis threatens to ensue, whilst the Five Star Movement waits for it’s moment and populism continues to grow.
The Almanis crowd correctly forecast the outcome of the referendum. Now join us in expressing your views on the following questions:
When will Italy’s next General election be?
Which Party will win the next Italian election?
Will Italy introduce a new domestic currency by the end of 2018?
Will Italy use taxpayer money to recapitalise any of its banks, in contravention of EU rules, before end 2016?
Will a second EU member state announce a referendum to leave the EU by the end of 2017?
Alternatively, suggest your own question about what the future holds for Italy and Europe as a whole.