“Mr Renzi promised he would resign if he loses. If he does, it will have been a monumental error of judgment on the scale of Mr Cameron’s”
The UK’s vote to leave the European Union could potentially destroy the eurozone. The Italian upcoming referendum is not about the European Union but about Matteo Renzi’s constitutional reforms. It is a risky gamble on the Italian Government future as David Cameron did. He is asking about reforms to streamline their political system but Italians view it as an opportunity for a midterm anti-government vote. Mr. Renzi has promised he will resign if he loses. At the moment, opinion polls show a small lead for Yes. The implications of Brexit for Italy are: firstly, the economic impact in Italy’s its economy has been in a weak recovery after a long recession, this means a reversion to a growth rate to below 1% or worse. Secondly, the Italian banks, which are woefully undercapitalised, a recent scheme to recapitalise the system has been a disappointment. Mr. Renzi will surely resist to be rescued. Thirdly, the political impact of a lost referendum will be disastrous. In this scenario, the party most likely to benefit is the populist anti-establishment Five Star Movement headed by Beppe Grillo. The Italian public has reasons to demand fundamental change, unlike in the UK, unemployment is high, there are many cases of corruption and its economy remains uncompetitive. People are beginning to blame the euro for the economic problems but an Italian exit from the single currency would trigger the total collapse of the eurozone within a very short period. To prevent it, EU leaders should seriously consider doing what they have failed to do since 2008: resolve the union’s multiple crises rather than muddle through.