Italians have voted to reject constitutional reforms in a referendum largely seen as a confidence vote in their prime minister.
As soon as voting ended exit polls estimated between 54 and 58 percent have voted no with between 42 and 46% voting Yes.
The vote, called by centre-left Prime Minister Matteo Renzi, was on plans to streamline parliament. Specifically to reduce the power of the Senate, cutting its members from 315 to 100 in order to speed up Italy’s cumbersome law-making process.
The result now leaves the future of Prime Minister Matteo Renzi un clear. Before the vote he said he will resign if he loses. Most opposition parties were against the reforms with the anti-establishment Five Star Movement leading the way.
Why this referendum vote matters for Europe:
For many this election is being seen as a continuation of the political narrative in Europe of mainstream politics versus the rise of populism.
The referendum’s goal is to break the country’s political deadlock and increase the likelihood that political, and more importantly, economic reforms can be put in place.
Italy has often been described as one of the EU’s weakest links as the bloc has tried to overcome austerity measures, unemployment, balance budgets and cut deficits.
One of the main arguments on the significance of this referendum is the concern that a NO vote will prompt added insecurity reports the BBC.
Italy, Constitutional Referendum:
— Europe Elects (@EuropeElects) December 4, 2016
The concern is that if Renzi goes, Italy’s politicians will squabble, the country’s fragile economy will suffer, borrowing costs will spike and once again Europe will be facing a crisis in the eurozone.
And this means the door could be made open if Renzi resigns as promised, for deepy anti-establishment populist movements like the Five Star Movement, to gain power and further influence Italian politics.
Again the BBC reports:
The risk is that a No vote and a Renzi resignation would tip Italy into an early election. And that might give the Five Star Movement and the anti-establishment Northern League an opportunity of success at the polls.
The prospect of two Eurosceptic parties gaining ground in the eurozone’s third-biggest economy might well rattle the markets.
Compounding this issue is the fact that Italian financial institutions are not in the best of health and a NO vote in this election could make Italy’s financial health more fragile.
As reports Sky:
A “No” vote is likely to trigger a fall in the Italian stock market and the country’s banking system, which since the financial crisis has been struggling to get itself back on a stable footing, is likely to be hardest hit.
Italy’s banks have an estimated €360bn (£300bn) worth of soured loans on their books that for years they have been trying to restructure.
Of those loans, some €200bn (£170bn) is “non performing” – in other words, they are already in default or close to default, having been made to customers who are insolvent.
Of that exposure, an estimated €85bn (£72bn) has yet to be “written down”, meaning that the banks have yet to recognise the losses in their accounts.
— Bloomberg (@business) December 4, 2016
The value of the euro has fallen on news of the Italy’s exit polls. The value of the dollar fell to $1.0580 from $1.0625