Referendum in Italy: results and possible impacts CNBC
Renzi resigns after NO result


Italians voted «No» in a dramatic referendum that has shaken Europe and forced Italy’s Prime Minister to resign. Specifically, the «No» vote won the referendum overwhelming with nearly 60% of Italian voters, rejecting Mr. Renzi’s constitutional reforms. On the other hand, only 40% of Italians voted «Yes» in support of the reforms after the high-profile referendum turned into a vote over the former Prime Minister. More than 19 million people voted «No», but less than 14 million people voted «Yes» overall during the referendum on Sunday 4 December 2016.  In a stark contrast, Italians living abroad gave strong support to Mr. Renzi with nearly 65% voting «Yes» to the reforms and the status quo.

Matteo Renzi invited the citizens to vote "yes" in the referendum, arguing that the Italian government will become more stable and effective through a series of important changes in the Constitution. The referendum was meant to stop the House and the Senate have an overlapping role, as happened from 1948 until today. Voters were asked whether they approve a constitutional law that amends the Italian Constitution to reform the composition and powers of the Parliament of Italy, as well as the division of powers between the State, the regions, and administrative entities.

The proposed reforms would have reduced the Senate's powers and transformed it from a chamber of 315 directly elected politicians and six lifetime appointees to smaller “Senate of Regions”. The new chamber would have had just 100 seats, 74 regional councilors, 21 mayors and five presidential nominees, with the latter serving for seven years rather than for life. Mr. Renzi’s reform would have tipped the balance of power towards the Chamber of Deputies – Italy’s equivalent of the House of Commons. The Senate would have retained its veto on constitutional matters, but the Deputies would have had the final say on every day bills. The Senate would also have been able to examine bills if a third of its members wished to do so, although its suggestions would not have been binding.

In essence, the constitutional revision was an attempt to reinforce the role of the central government in Italy, as well as limiting the number of Senate members and particularly the problems that are responsible for the obstructiveness of the Italian State. Clearly, Renzi wanted to strengthen the role of the Prime Minister and thus its position in the Italian state, in order to achieve its objectives without obstacles.

Although, Renzi had promised to quit his position if he failed, and an hour after the exit polls came out, he did. “I lost. In Italian politics, no one ever loses,” he told a news conference just past midnight. “But I am different. My political experience in the government comes to an end here. “The «no» won in an extraordinarily clear way. Now it’s up to them to come up with concrete proposals and reforms,” Renzi said, adding that he would formally advise President Sergio Mattarella of his decision on Monday, after saying goodbye to his cabinet.

After that, populist parties across Europe, like “5 Star Movement” of Beppe Grillo, celebrated the Italian referendum result as another blow to the crumbling European Union. Former UKIP leader Nigel Farage said: “This vote looks to me to be more about the Euro than constitutional change.”  Also, France's National Front leader Marine Le Pen said: "The Italians have disavowed the EU and Renzi. We must listen to this thirst for freedom of nations.” But EU officials insisted that the vote was on Italy’s internal constitutional reforms, not the EU and its single currency. 

After Mr. Renzi hands in his resignation, President Mattarella will appoint a caretaker government to lead Italy until the 2018 general election. Finance Minister Pier Carlo Padoan is the front-runner to be chosen as Prime Minister and would be tasked with passing an electoral reform known as Italicum.

On the other hand, we should also talk about the consequences of the referendum in the economy and market. Italy is the eurozone’s third largest economy, but eight of its banks are struggling under the pressure of bad debts. Banks are struggling under €360 billion (£300 billion) of non-performing loans that are unlikely to ever be repaid, according to Bank of Italy figures released in April. In total, this makes up more than 18 per cent of the country’s lending. For example, just hours after the referendum result Italy’s biggest bank UniCredit saw its share price drop by almost three per cent, while the country’s oldest and most vulnerable banks Monte dei Paschi di Siena (MPS) saw its stock fall by almost two per cent.

Any shock is not impossible to have an impact on other eurozone countries. Unfortunately, in the case of Italy any financial-package support will not work, as in the case of Greece, Ireland or Portugal. If Italy deals with bankruptcy, then the country will reach a standstill. The eurozone could not help Italy, but would be forced to let it go bankrupt, and this would have also consequences for the common currency.

A further deterioration in the Italian banking crisis, with an impact on the Italian and therefore the European economy, is the biggest fear.

Finally, we are talking about a Europe that constantly sinks, with the main threat of the resurgence of nationalism, racism and the extreme right.