BY JOSH LOWE
This was no straightforward populist vote, but it has far-reaching implications.
Constitutional reform isn’t a
topic that usually has the world holding its breath. But Sunday’s referendum in Italy, where voters overwhelmingly rejected attempted changes to the political process
proposed by Prime Minister Matteo Renzi, is an exception.
After the defeat, Renzi
resigned. With Europe already nervous about political instability and the rise of
populism, everyone is wondering what the vote means and what will happen next.
Here’s
five things to watch out for:
Renzi’s replacement
“In Italian politics, no one ever
loses,” Renzi told a news conference Sunday night, “But I am different. My
political experience in the government comes to an end here.” While some
European moderates had hoped Renzi would cling on in the face of rejection, he
decided not to risk it. What isn’t clear is how his successor will be chosen,
let alone who that will be. A caretaker government could take over, with
Finance Minister Pier Carlo Padoan the most likely among several possible
leaders, or snap elections could be on the horizon.
A new star rises
This was no straightforward populist
vote: the winning “no” side was backed by Mario Monti, Italy’s technocratic
former prime minister, and by the Economist, a strong contender for the world’s
most establishment newspaper. But the Five Star Movement, a ragtag collective
of leftists, the hard-right, Euroskeptics and anti-corruption activists led by
the comedian Beppe Grillo, were some of the most important campaigners against
Renzi. The debate has led to a rise in their poll rating, and they could stand
to gain if elections are called. The far-right Lega Nord were also on the
winning side.
Don’t bank on it
For a range of reasons mostly
unconnected with the referendum, Italian banks are in trouble, and the result
isn’t going to help. As ever, the prospect of political instability has spooked
markets and, just as the euro began to fall against the dollar as news of the
result broke, shares in the struggling Banca Monte dei Paschi di Siena SpA
could also suffer, Bloomberg reported. It is partway through a last-ditch attempt
to raise 5 billion euros ($5.3 billion) of new equity, and the current
situation could make that harder. That raises the prospect of nationalization,
which could hit Italian investors.
Insurgents cheer
It’s not yet clear why Italians voted
the way they did, but Europe’s hard-right populists were keen to explain it
anyway. Nigel Farage, the former UKIP leader and Brexit campaigner, hailed it as
a rejection of the euro,
as did Marine le Pen, the far-right National Front candidate for the
French Presidency. It’s hard to argue that euroskepticism was more than one of
several factors in the vote, though; this was a poll on internal politics, not
the EU. And in any case, it is extremely hard for any solvent eurozone country
to leave the single currency.
The gridlock continues
Experts were divided on whether Renzi’s
reforms would have brought the change Italy needs. But they were aimed at
increasing the power of its lower house at the expense of the upper Senate, and
otherwise altering the political system to make it easier for governments to
pass laws. For now, the country’s “perfect bicameralism,” introduced after the
fall of Benito Mussolini to keep fascism at bay, remains in place. But
reformists will need to devise new answers to the questions posed by Italy’s
frequent political deadlocks.
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