Constitutional referendum in Italy: less than three weeks to go

1600x600_Rome_EveningWith the turmoil resulting from the US election starting to fade, attention is now turning to the Italian referendum on 4 December. The referendum will give citizens the opportunity to embrace, or indeed reject, the constitutional reforms enacted by the Italian Parliament. With less than three weeks to go, Italian politicians are preparing for the last push, while citizens, businesses and investors are trying to grasp what is really at stake.

If the referendum is passed, a number of institutional changes will take place. The Senate, whose powers are currently equivalent to those of the Chamber of Deputies, will no longer be required to approve every text of law. Moreover, the all-important vote of confidence following the appointment of a new government will be an exclusive prerogative of The Chamber of Deputies. The number of Senator will be reduced, from 320 to 100, and they will be indirectly elected among local and regional representatives. Accordingly to Renzi, this will simplify the legislative process and the division of competences between the Italian regions and the central government.

The reform also intends to shift decision-making power, in a number of policy areas, from the regional authorities to the central government. This aspect of the reform is used by both supporters and opponents of the referendum to promote their cause. The former believe that this would remove duplications and create a more harmonized approach, making it easier for companies to conduct business in Italy. The latter group fear that this would concentrate too much the power in the hands of the central government, rendering it unaccountable. Whether or not one is in favour of such a change, nobody doubts that it would result in a considerable transformation of political procedures, and fundamentally change the makeup of institutional stakeholders that companies and investors look to deal with when conducting business in Italy.

In addition to its institutional and rather long-term effects on the governance of the country, the result of the referendum may have a major impact on Prime Minister Renzi’s leadership, and the reform course undertaken by its government two years ago.

If the referendum is approved, Renzi will register an important victory, strengthening his power and leadership in view of the elections in 2018. A success will reinforce Renzi’s mandate to reform the country, and strengthen his battle to make the EU’s economic policy more flexible. On the other hand, if citizens reject the constitutional change, a number of different scenarios will open up.

If Prime Minister Renzi is consistent with his past promise to resign in case the constitutional reform is not approved, the Italian President, Sergio Mattarella, is likely to look to form another temporary government, before a 2017 general election, after amending (once again) the electoral law. In this case, Renzi’s opponents will build on the referendum defeat to gain further support with a view to the new election. In the event that Renzi decides to continue his mandate, opponents would be increasingly ready to question his credibility,  limiting Renzi’s government action. In any case, a negative outcome of the referendum would lead to extra months of political campaigning and less vigorous political reform.

Polls do not appear favourable to the government, which has not managed to close the gap between supports of the reforms, and the wide group of its opponents, stretching from the 5 Star Movement,  to the centre-right Forza Italia, to the  Northern League and a considerable leftist minority within Renzi’s own Democratic Party. However, Renzi is still confident that the polls, as in the case of the US, may not reflect the inclinations of a large group of undecided electors, and will do his best to mobilise this silent majority over the final three weeks. One thing remains clear, there is still all to play for.

Andrea Corazza is Director and Nicola Scocchi is Consultant at FTI Consulting in Brussels.

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