Italy will hold a referendum on constitutional reform on Dec. 4 involving a proposal to slim down the country’s legislature and speed up lawmaking.
Prime Minister Matteo Renzi’s Democratic Party first made the proposal in April 2014 to downsize the number of senators from 315 to 100 and allow many bills to be approved by the lower house only.
Only certain types of legislation such as electoral or constitutional changes would require approval by both houses.
However, the proposal has failed to obtain two-thirds vote in parliament, making a referendum necessary.
A recent survey shows public support for the bill at about 50 percent.
Renzi has pledged to resign if a “no” vote wins.
If so, it could send the country into political upheaval again as happened when former prime minister Silvio Berlusconi stepped down.
The anti-establishment Five Star Movement (M5S) could be the biggest winner.
The referendum is thus widely watched for its profound implications.
For instance, Virginia Raggi, Rome’s first female mayor, was elected in June.
She is a member of M5S and has a 67 percent approval rating from voters.
M5S is the most popular political party in Italy, according to a poll by the Demos Institute in July.
As anti-EU party, M5S wants to hold a referendum over whether Italy should leave the eurozone.
If the constitutional referendum fails, M5S might take power and trigger the referendum.
If that happens, and Italians vote for exit like the British, it could have a hugely negative impact on the euro.
In fact, among EU members, several other populist parties all have gained traction such as Front National in France, Alternative für Deutschland in Germany, Spain’s Podemos and Austria’s Freiheitliche Partei Österreichs.
If Italy exits the EU, it would pose an existential threat to the European Union.
Since September, the euro has been trading in a range of 1.11 and 1.136 against the US dollar.
Technically, it is poised for a breakout. Italy’s referendum could be the trigger.
On the upside, 1.1432 and 1.1614 are key resistance levels while on the downside, 1.10 and 1.07 are critical support.
Elsewhere, gold prices have managed to stay above the 100-day moving average in the past three months, laying the foundation for the yellow metal to test the upside once the consolidation is over.
Potential upside targets are US$1,358 and US$1,367 per ounce.
This article appeared in the Hong Kong Economic Journal on Sept. 28
Translation by Julie Zhu
[Chinese version 中文版]
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