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Threat of Brexit contagion hangs over Italy's referendum

© Andreas Solaro, AFP | Italy's Prime Minister Matteo Renzi has said he will resign if he loses Sunday's constitutional referendum.

Video by FRANCE 24

Text by Benjamin DODMAN

Latest update : 2016-12-04

A year ago, Italy’s Matteo Renzi confidently staked his political future on a constitutional referendum. But that was before Brexit and Donald Trump. With Italians now in similarly insurgent mood, the gamble threatens to backfire spectacularly.

Politicians struggling to make sense of a tumultuous year for Western democracies can draw at least one lesson from 2016: that calling a referendum to buttress their power – or merely appearing to do so – is a recipe for disaster.

The UK’s David Cameron notoriously gambled with his country’s future in Europe in order to win a general election and cement his leadership of a divided party. The result was Brexit – and early retirement.

There are plenty of parallels to be drawn with Sunday’s Italian referendum, over plans to reform the country's constitution and streamline parliament.

Italy’s youthful prime minister, who rose to power courtesy of a party coup in 2014, was hoping a decisive win would grant him democratic legitimacy and silence his many critics. Instead his tactical mishaps threaten to plunge his country – and the Eurozone – back into crisis.

Renzi has made a strategic blunder by turning the referendum into a personal issue,” said Paolo Bellucci, a professor of political science at the University of Siena, referring to the prime minister’s pledge to resign in the event of a “No” vote.

“As a result, voters see this as a chance to deliver a vote of no confidence in the government,” Bellucci told FRANCE 24.

Senate humbled

Complicating Renzi’s task is the fact that Italians are being asked to cast a single vote on a complex bundle of proposals, including intricate issues normally discussed only by technocrats and constitutionalists.

Not all of the proposed reforms are contentious. They include plans to scrap an obscure government advisory body housed in an imposing Roman palace, which has made just 14 policy proposals in 60 years, all of them rejected. Everyone agrees it should go – including its own vice-president, who described it as “useless”.

The core reform, which involves drastically downsizing Italy’s Senate, is more divisive. It will shrink the number of senators from 350 to 100, and strictly curtail their powers. Members will no longer be elected by the people, but appointed by city governments and regional assemblies. Effectively, Italy will go from a bicameral to a unicameral system.

Critics have slammed the constitutional reform as a distraction from Italy’s real problems. They warn that downsizing the Senate will strip Italy of the checks and balances put in place after World War II to prevent the rise of another Benito Mussolini.

But Renzi, 41, says the move is necessary to modernise the country and end logjam in parliament, thereby paving the way for much-needed reform in other areas. It is meant to go hand in hand with a new electoral law designed to ensure elections produce winners with clear majorities – a rare luxury in a country that has had 63 different governments since the war.

Yes, but ‘No’

When Italy’s centre-left first unveiled the constitutional reform in late 2014, surveys suggested some 70% of Italians approved of it. Support remained strong in April of this year, when the package cleared the last hurdle in parliament. Fatefully, the prime minister insisted that voters also have their say.

Recent polls suggest most Italians still back the proposals, when taken one by one. A survey by Cise-Il Sole 24 Ore, published on November 17, said 57% favoured giving the lower house of parliament precedence over the Senate. Another proposal, to return some devolved powers back to the central government, enjoyed 52% support.

And yet all polls say Renzi is poised to lose the referendum – some by as much as eleven percentage points.

“It is one of the great paradoxes of this vote,” said Bellucci, whose own research at the University of Siena has produced the same result. “A majority of voters claim they back the reforms, and yet they plan to vote ‘No’,” he added. “That’s because they see this referendum as a vote on the government.”

Sunday’s ballot comes at the wrong time for Renzi, whose attempts to liberalise Italy’s labour market have alienated many leftwing supporters – without seriously denting the country’s stubbornly high unemployment rate.

His approval rate has been halved, to 30%, amid a worsening migrant crisis and a sluggish economy. After a decade without growth, Italian households are poorer than before the crisis and youth joblessness hovers at around 40%. It is no coincidence that the “No” is polling strongest among young voters and in Italy’s perennially poorer south.

“The referendum has highlighted the divide between the winners and losers of globalisation,” says Bellucci, drawing a parallel with the recent votes in Britain and the US. Compounding Renzi’s woes, the anti-establishment wave that swept across Western democracies this year has galvanised Italy’s own rabble-rousers.

‘Populist’ and proud

The rabble-rouser in chief is comedian-turned-firebrand Beppe Grillo, whose 5-Star Movement (M5S), founded just seven years ago, is now the country’s main opposition force, polling neck-and-neck with Renzi’s ruling Democratic Party.

Grillo has drawn voters from the left and the right with an eclectic platform that combines direct democracy, environmentalism, a tough line on immigration and fierce opposition to the euro. He is part-Pirate Party and part-Occupy Wall Street, though his gags and rants against the tax collector are more reminiscent of Silvio Berlusconi.

Predictably, the mainstream parties have branded him a “populist” – a title he and his followers relish.

In many ways, the 5-Star Movement is merely the latest expression of the anti-establishment sentiment that has been a fixture of Italian politics for decades. Its founder has hailed both the Brexit vote and Trump’s victory, describing them as one big “vaffanculo” (f**k off) to the elite. He says it is time Italian voters follow suit and send their government “A casa” (back home).

"The world is changing," Grillo told a rally in Rome on Saturday. "We have to throw our 'No' back in their faces. This is not a political 'No', it is an existential 'No' and a social 'No' ... Our world is coming."

Italexit

Whether Renzi and the rest of his government will be sent “a casa” if they lose the referendum is still far from certain. Italian President Sergio Mattarella is likely to try to persuade him to remain in office to oversee electoral reform, or to push for a government of technocrats until the next elections. Either way, elections must take place by early 2018 – and the 5-Star Movement stands to profit most.

The prospect of political turmoil – and a possible victory for Grillo’s movement – has alarmed Italy’s European partners and spooked investors. On Monday, British daily the Financial Times warned that eight Italian banks could go under should a “No” vote trigger a financial crisis.

Beppe Grillo's Five-Star 'Tsunami Tour'

The biggest immediate loser if the 'No' camp triumphs could be the world’s oldest bank, Monte dei Paschi di Siena, which is saddled with bad loans and looking to raise 5 billion euros ($5.3 billion) next week to stave off collapse. Investors are likely to shun the operation if political chaos prevails, forcing the state into a costly intervention.

"Sunday's referendum on constitutional reform is Italy's Brexit moment and a 'No' vote would send tremendous shockwaves through the markets and the banking system. It could also heap pressure on the euro," warned Neil Wilson of ETX Capital.

The dire warnings have fuelled talk of a possible “Italexit”, or “Italeave” – meaning an Italian exit from the European single currency. That is precisely what Grillo is clamouring for, as is Renzi’s other formidable foe Matteo Salvini, the leader of the anti-immigrant and fiercely anti-euro Lega Nord (Northern League).

Fear factor

A close ally of Marine Le Pen’s far-right National Front, Salvini has thrown his lot behind the “No” campaign. Like Grillo, he is riding a wave of hostility towards Brussels in a country that was once among the most Europhile, but is now fuming over the lack of support from EU partners in dealing with the migrant crisis.

After the Brexit vote in June, Salvini tweeted: “Thank you Great Britain, now it is our turn.”

With the odds now stacked against him, Renzi has begun to talk tough with Brussels in an attempt to tap on this growing Euroscepticism. He has threatened to ignore its austerity rules and veto the next EU budget if other countries refuse to shoulder part of the migrant burden.

The 41-year-old has campaigned flat-out through the autumn, holding dozens of rallies across the country in an effort to reclaim the Italian piazza from Grillo and Salvini. He has pointed at the large number of undecided voters – a quarter of the electorate – as evidence that the race is far from over.

Like market analysts, the Italian prime minister has played up the economic risks of a “No” vote. He has highlighted the recent spike in interest rates on government bonds, warning that further instability would soon make Italy’s huge public debt unsustainable.

In doing so, critics say Renzi has failed to draw the lessons of Brexit. “He has adopted the same strategy as the ‘Remain’ camp in Britain, focusing on the economic fallout from a ‘No’ vote,” said Bellucci. “It is a strategy that seeks to scare people but no longer works.”

Date created : 2016-12-01

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