THE Italian government has announced that a
much-anticipated referendum on constitutional reform is to be held on December
4th. The outcome will be crucial for the prime minister, Matteo Renzi
(pictured), who said earlier this year he would resign if the vote went against
him. That was rash. By personalising the ballot, Mr Renzi created an
opportunity for voters to register a protest against his left-right coalition
and, in particular, its failure to revive the economy.
Quarter-on-quarter
growth in the second quarter was flat. A government victory that at first
seemed assured now looks much less certain. The latest poll, for Eumetra,
a research institute, estimated that when undecided voters and likely
abstainers were stripped out, the opponents of the reform had increased their
lead to 10 percentage points. Why?
Unlike David Cameron, who called Britain’s referendum
on EU membership, Mr Renzi had no option but to stage a referendum after
failing in parliament to secure the necessary two-thirds endorsement for the
changes he seeks. Their aim is to make Italy, which has had 63 governments in
the 70 years since the birth of the Republic, a more governable country. The
mayfly-like lifespans of Italian governments is not the sole reason that they
find it impossible to implement their programmes. The two legislative chambers
have equal powers, so bills must go between them until they are approved in
identical form. The constitutional-reform bill would drastically curb the power
of the Senate.
Another reason it is so hard to bring about change is that
central and regional governments have overlapping responsibilities. The reform
would tackle that too.
Critics argue that, when taken with a new electoral
law that has already been approved by parliament (but which could be reopened),
the reform would give the next prime minister too much power. The head of
government would have five years in office with a guaranteed parliamentary
majority, free of even the threat of a rebellion in his own ranks—deputies’
prospects for re-election will depend not on their popularity with their
constituents but on their standing with their party leader. It does not help
that the hyper-active Mr Renzi is notorious for running government as a one-man
show.
What spooks investors is not so much that Italy could
lose a once-in-a-generation opportunity to sort itself out, but that Mr Renzi’s
departure could pitch the country back into political disarray and spark a
wider crisis in the EU economy. Italy is a weak link: it has debts of 132.7% of
GDP and a banking sector weighed down by bad debts after years of sluggish
growth.
Moreover, Italy’s biggest opposition group and the most obvious
beneficiary of a government defeat is the internet-based Five Star Movement,
which was founded by a comedian, Beppe Grillo, and largely composed of
political novices. Whether it could run a national economy is far from
clear. Mr Renzi’s chances of victory would be enhanced by either some good
economic news or the budgetary leeway to offer a few juicy titbits to voters in
his government’s 2017 budget.
But the economic news continues to be dismal.
Despite a widely applauded reform of Italy’s employment laws, the number of
indefinite contracts offered by employers was down by a third in the first
seven months of 2016. As for fiscal flexibility, Italy remains bound by the
euro zone’s strictures and neither the European Commission nor the German
chancellor, Angela Merkel, look ready to cut Mr Renzi significant slack. That
could explain why he played the brat in Bratislava at the EU’s last summit,
refusing to join a concluding press conference given by Mrs Merkel and François
Hollande, the French president.
Appearing exasperated with the EU’s austerity
policies has a double advantage: it casts the blame for Italy’s lacklustre
economic performance elsewhere and lends Mr Renzi an air of fashionable
euro-scepticism. Expect more posturing as the vote draws near.
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