Voters are becoming fed up with the politics as usual represented by traditional political parties, which have presided over rising inequality. Eurosceptic parties across Europe have been emboldened by Donald Trump’s victory in the US presidential election and Britain’s June vote to leave the EU. The wave of populism that is sweeping through Europe is now threatening Italy’s centre-left government.
Matteo Renzi, Italy’s business-friendly prime minister, faces a referendum early next month on the far-reaching constitutional reform designed to ease gridlock in the country’s political system, making it leaner and more efficient. The key element of proposed changes is to bring back decision-making powers from regional governments to the central government and reduce the size and power of the Senate, the upper house of parliament. The Senate would no longer be elected by direct, popular vote, but would consist of regional representatives. It would not have the power to bring down governments with a vote of no confidence and the number of lawmakers would be reduced from 315 to 100. At present, parliament’s two chambers have equal power, so bills have to go between them until they are approved in identical forms. It comes as no surprise that Italy has seen 63 different administrations since the Second World War.
But, the constitutional reform would concentrate too much power in the hands of the ruling party as a new electoral law gives an absolute majority in the Chamber of Deputies to a party, which wins in a national election. A future government, therefore, could be a one-man show.
Mr Renzi is convinced that Italy’s woes are institutional, because reforms are blocked by vested interests. He said that he would resign, if a No vote prevailed, ending his time in office after two-and-a-half years. That statement was a mistake, because it only gave the opposition the opportunity to seize on a referendum as a means to remove Mr Renzi from office.
The No camp is dominated by anti-establishment parties, which have questioned Italy’s membership in the eurozone, but it also includes members of Mr Renzi’s centre-left Democratic party (PD) such as Pier Luigi Bersani, a former PD leader who views himself as a victim of a hostile takeover of the party by Mr Renzi, and Massimo D’Alema, a former prime minister. Mario Monti – who led the government at the height of the eurozone debt crisis, pushing through a series of tough austerity measures – has also said that he will vote against the constitutional reform.
The Yes campaign is trailing slightly in opinion polls, albeit with many undecided voters. If the No camp prevails, a caretaker government is likely to be appointed, with its sole purpose of passing a budget and bringing Italy to the polls by 2018. Mr Renzi, however, may ask President Sergio Mattarella to dissolve parliament and call a snap election. Mr Mattarella is likely to choose this option rather than endorse Italy’s fourth unelected prime minister in five years. The next election will be a direct contest between Mr Renzi’s centre-left PD and the anti-establishment Five Star Movement, which wants to pull Italy out of the eurozone.
The December referendum is the most immediate political risk in Europe after the US election. A No vote will almost certainly usher in a new period of political instability in the eurozone’s third-largest economy, possibly triggering a financial market crisis, given the banking sector’s vulnerability.
Economic concerns might influence voters to reject the proposed constitutional changes. The economy has recovered from the bruising triple-dip recession under Mr Renzi, but it is barely growing, which only fuels public anger. The economy stalled in the second quarter, but bounced back in the third quarter, growing 0.3 per cent quarter-on-quarter, matching growth in the eurozone as a whole for the first time since 2013. GDP expanded 0.9 per cent year-on-year, a pick-up from an annual pace of 0.7 per cent between April and June. Mr Renzi’s government sees the economy growing by only 0.8 per cent this year and 1 per cent in 2017. GDP remains below its pre-crisis peak.
Anemic growth has had knock-on effects on unemployment, which remains stuck at more than 11 per cent of the workforce, above the EU average. Youth unemployment is close to 40 per cent, forcing young people to leave for work abroad.
The government targets a budget deficit of 2.3 per cent of GDP in 2017, lower than this year’s 2.4 per cent of GDP, but higher than a target of 1.8 per cent of GDP that was previously agreed with the EU. Rome invokes August’s devastating earthquake, which flattened towns in central Italy, and the refugee crisis, which continues on the country’s southern shores, to justify fiscal loosening.
Photo: Andrej Klizan / EU2016 SK
