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Will Italy’s referendum trigger the next crisis?

Yes or no? Italian voters decide on December 4.

2016 has been a year of political surprises. June gave us Brexit, November US-President elect Donald Trump and December might give us a government crisis in Italy.

On December 4, Italians go to the polls to approve or reject a series of constitutional changes supported by the incumbent government.

If approved, the reform will amend 47 articles of the Constitution. Some of the changes will be minimal, others are more significant. The stated aim of the reforms, the government claims, is to reduce the size of the parliament and simplify its legislative procedures; cut red tape, reduce costs and improve both the stability and efficiency of government.

If the reform is rejected, Italy might plunge into a period of political uncertainty.

With only hours left before the vote, the outcome is anything but certain. Italian media, the parties and the public are all significantly divided between the “Yes” and “No” camps, though some polls put “No” slightly ahead (but with at least 13% of the electorate undecided).

Prime Minister Matteo Renzi has staked his leadership on winning the referendum. A “No” vote, he has warned, might trigger a government reshuffle at best and at worst a general election one year early.

For many, a government crisis in Italy would hardly qualify as a surprise. It would certainly not be in the same league as a Trump presidency or the UK’s decision to leave the European Union. After all, Italy has never been known for its political stability.

Since becoming a republic in 1946, there have been 17 legislatures, 27 prime ministers and 63 governments. That’s almost one a year. Bizarrely, the most stable political period the country has known was under the controversial leadership of Silvio Berlusconi. The media tycoon holds the record as the longest-serving prime minister of the republican era.

Yet, for some observers, the new crisis would come at the worst of times and might have grim repercussions not only on the country’s future but also on Europe.

The country is on the verge of a nervous breakdown. Its economy is in deep stagnation, while financial observers regard its banking sector as a ticking time-bomb.

The outlook is not helped by the fact that the country seems like a ship without a captain. From left to right, the political class is in a state of turmoil, with new leaders gaining support, while old ones fight to remain in power.

Are the doomsayers right? The short answer is possibly yes, but most likely not.

To understand why the crisis might or might not precipitate the predicted doom we need to unpack the problem to its three essential components: the reform; the Renzi factor; and the economy.

The crux of the matter

For the government, but also for some international observers, the reform is crucial to stop the rickety trawler called Italy from capsizing. There is very little disagreement about the fact that constitutional reform is overdue, but it is increasingly evident that the one the Renzi government proposes might not be the right one.

Both the reform and the referendum campaign have ignited a fierce debate and spawned a long list of grievances, not only from the opposition parties but also from within the ranks of Renzi’s Democratic Party.

The text of the referendum question was challenged in the courts for being both too simple and biased in favour of the “Yes” campaign. Who wouldn’t want to cut the costs of politics, reduce the number of politicians in parliament and make government more effective? The challenge was rejected, but the criticisms lingered.

The referendum question.

The whole campaign – a mix of daily doomsday scenarios and biased messages – has not always been as successful as the government hoped. Not unlike in the UK before Brexit, in fact, some of it has backfired. It has left the electorate suspicious of the government’s real intentions. At times, the “Yes” camp’s approach reminded people of a crooked salesman who desperately needs to close a deal, regardless of the customer’s real needs.

On the other hand, much of the text of the reform is an example of excruciating bureaucratic verbosity. At between 300 and 439 words, some of the proposed amended articles read like a linguist’s worst nightmare. The old articles were intentionally written with simple and short sentences.

Take article 70, which, as Diego Petrini pointedly notes in Il Fatto Quotidiano, is a perfect example of the linguistic differences between the old and the new Constitution. The original article, which deals with the role of the two houses of parliament, comprises only nine words: “La funzione legislativa è esercitata collettivamente dalle due Camere.” (The legislative function is exercised collectively by both Houses [of Parliament].) The new article will be 439 words. So much for simplification and clarity.

The modification of Article 70 (along with the text of several other related articles) is the proverbial crux of the matter.

Italy is a “perfect” bicameral system – where the term “perfect” does not refer to the quality of the system, but to the balance between its parts. All laws are discussed and approved by both houses: the Chamber of Deputies and the Senate of the Republic.

Italy’s bicameralism is the product of its era. The Constitution was drafted in the aftermath of World War II. The country was recovering from two decades of fascist dictatorship and had just repudiated monarchy for democracy. Between 1946 and 1947, the spectre of Il Duce Mussolini played an important role in the discussion of what shape should the new-born republic should take.

It wasn’t only that. Though still in its early stages, the icy air of the Cold War had already reached the southern shores of Europe by the time the constituent assembly was in full session in Rome. The growing distrust and fear of the spread of communism was also part of the reasons for bicameralism.

The solution to the problem was a flawed compromise. Though it stalled the possibility of Italy ever joining the Soviet Union or again falling prey to a dictator, the new Constitution created a system that made governing and law-making the very opposite of simple and effective.

If Italians vote “Yes” on Sunday, they will de-facto abolish Italy’s bicameralism.

The Senate will not disappear, but it will no longer serve its original function. The system of parliamentary checks and balances will change radically. Essentially, if the reform is approved, all the legislative power becomes concentrated in one house.

Laws will only be passed by the Chamber of Deputies (there are, however, some exceptions where the Senate’s vote counts as equal – such as with laws that impact the Constitution, the legal framework of the local authorities, or the European Union).

Italian Senate. Wikipedia

The Senate will be able to suggest modifications to the text of new laws, but the Chamber of Deputies will have the right to reject any proposed amendment. Also, only MPs of the lower house will have the right to vote in a confidence motion.

The number of senators will be reduced to 100, from 315. Most importantly, the new senators will no longer be elected by the people. Five are to be appointed by the President of the Republic, while the remaining 95 are chosen through a proportional system by local authorities via the elected representatives of the regions and the city halls.

No one really disagrees that the Italian Parliament needs to be reformed. As the two houses often carry out the same tasks, they seem redundant. Undeniably, the system makes the law-making process slow and cumbersome. Months can go by without much happening. And the country is in desperate need of new laws to tackle many of the unresolved quandaries that have developed in decades of bad governance.

Reducing the Senate to a mere extra in the political process is, however, not the kind of change the system needs. If it is true that Italy hasn’t had a Mussolini for quite a while, it nevertheless endured two destructive decades of Berlusconismo. Though one could argue that the system did not prevent Berlusconi from staying in power, his tenure could have been much worse with the new parliament proposed by Renzi.

The reform of the Senate, in fact, needs to be put in context. If paired with the new electoral law the government has recently passed, it opens the door to a dangerous concentration of power in the hands of one party (thus, given Italy’s highly corrupt party system, in the hands of one leader.)

In the name of stability, the new electoral law guarantees an automatic majority for whichever party gets over 40% of the vote. If the first electoral round produces no clear winner, there will be a face-off between the two top parties. The winner will be able to govern the country for the next five years pretty much unchallenged.

Any reduction of check and balances in a democracy never bodes well for the future. Wasn’t that the main lesson we learnt from the global financial crisis in 2008?

The list of objections and problems with the proposed constitutional reform is even longer and a lot has been said already in recent months. It is worth remembering that many of the points touched by the reform are not trivial. Law-making needs to be more effective and swifter.

The Senate should indeed not be a redundant mirror of the Chamber of Deputies. But the new text of the Constitution, the many complaints and the last-minute flip-flopping of the government (Renzi has now hinted that the senators will be directly elected by the people) suggest the reform, to say the least, was not ready to be put to the electorate and needs some more tinkering, especially with regard to its main tenets.

At the very least, the approval of a complex reform like this should not hinge on the answer to a simple –some would say wilfully biased – question. A wiser, more democratic (and indeed less open to criticism) option would have offered the people a question with multiple choices.

A crucial moment for Renzi

The referendum is not just a about the reform, it has become a confidence vote on the government, and especially on its leader.

Not unlike David Cameron with Brexit, Renzi has made the strategic mistake of binding the future of his leadership to the outcome of Sunday’s vote. If the reform is approved, he carries on until the next election; if the answer is “No”, he will step down. Sunday might be the end of Renzi, the unravelling of his Democratic Party and open the door of government to new forces, such as Beppe Grillo’s Five Star Movement.

Yes or no? Matteo Renzi’s fate may depend on the answer. Youtube

Though not without controversies, Renzi and his government have been quite successful thus far (at least from a centrist perspective). The government has produced several reforms and enacted a conspicuous number of new laws. Yet it has been accused, especially by the opposition, of carrying on without the people’s mandate. There is some truth in the accusation, but the issue is not as straightforward as the government’s critics claim.

The current parliament is not unlawful, but its mandate is ethically questionable, as is Renzi’s.

For the parliament, the crux of the matter is the legitimacy of the law that elected it. After the 2013 election, the High Court ruled the electoral law unconstitutional. By law, however, the new parliament, once sworn in, must carry on at least until a new electoral law is passed.

The ruling makes perfect legalistic sense, otherwise the issue of legitimacy will never be solved. To dissolve the parliament without a new electoral law would mean to go to the elections once again with an unconstitutional law and hence elect a new illegitimate parliament.

Ethically, Renzi’s position is also rather questionable.

Coming to power by means of an internal party coup, Renzi has never actually been elected to parliament. To make matters worse, Renzi’s predicament is not unique. He was preceded by Mario Monti and Enrico Letta, both unelected.

The prolonged recurrence of unelected prime ministers and the unconstitutionality of the electoral law, coupled with the stubborn attitude (one could call it hubris) of the government in trying to reform the country’s legal system without a proper mandate has left a bitter taste in the Italian electorate. The widespread feeling is that elections are pointless and people have no power.

Unsurprisingly, since the beginning of his tenure, many suggested (others demanded more forcefully) that Renzi call a general election to secure a legitimate mandate from the people. He has been hesitant to do this.

The problem is that he has never led his coalition to victory in a general election. And elections are never easy to predict, especially when there is widespread discontent (ask the Americans). If he had called the elections during his first year, when he had a high approval rating, he would probably have won (his party scored over 40% at the European elections in 2014).

But in the past year, though Berlusconi’s ragtag coalition no longer represents a credible challenge, the electoral appeal of the Five Star Movement has put Renzi ill at ease.

In 2013 the Movement came within a whisker of winning the election. Only the controversial electoral law denied it victory. Some attack the Renzi government’s new electoral law as an attempt to prevent the Five Star Movement from gaining even more support at the next general election.

And Renzi has more than a few reasons to worry. Recent polls confirm that Italians are more likely to vote for the Movement over Renzi’s party.

Unsurprisingly, his approval rating is half of what it was at its peak in 2014. Only 38% of the Italian people declare their faith in him, compared to the 70% of two years ago.


Renzi’s main problem is Italy’s economy, which is also the European Union’s worst nightmare. Many observers have warned the country is on the brink of economic collapse.

Despite Renzi denying the crisis, the hard truth remains: the country is far from healthy.

Italy’s debt:GDP ratio is second only to Greece’s.

Public debt has skyrocketed to 135% of the GDP, the overall unemployment rate is 11.45% (only Greece has a higher rate than Italy in the EU). If we consider youth unemployment (between 15 and 24 years old), the rate is over 38%. True, that’s 2% better than it was before Renzi, but far from ideal.


The IMF considers Italy to be in the middle of a two-decade-long recession. Though it barely survived the 2008 global financial crisis, the country’s banking system, burdened by overexposure to loans (€360 billion or a fifth of Italy’s GDP) is ready to bust. The shockwave not only will influence the country’s growth for years to come, but Europe as well.

And now the referendum is seen as the last opportunity to guarantee stability and avoid the country’s collapse.

Even the authoritative Financial Times has described Sunday’s referendum as a moment of truth, not only for Italy, but for all Europe. The paper warned of “multiple bank failures if Renzi loses referendum”. It is the Brexit syndrome all over again.

The ripple effects of Italy’s implosion on Europe will certainly dwarf those of Greece and might plunge the whole continent back into the recessionary levels of the GFC. However, the implosion will not be the result of the referendum. If it happens, it will happen because the system has been hiding its flaws for far too long.

After all, the current government does not have a solid majority to guarantee the reforms that are needed. Crisis might happen with or without the referendum.

Whatever happens on Sunday, Monday will not be Italy’s doomsday (if that day comes, it will come much later). Renzi might well lose his job (though I doubt it), but if instability is what really worries the markets, it is unlikely the parliament will be dissolved. The legislature will probably carry on until its natural deadline in 2018 (the only way for many MPs to secure a pension). What might happen in 2018 is at this stage really hard to predict.

If by Monday, Matteo Renzi is gone or on his way out, the Democratic Party and the centre-right might not be eager to gamble on new elections. The Five Star Movement might end up being the preferred choice for the largest part of the electorate, as happened during local elections last May.

The most conservative and likely scenario is one that has repeated itself many times before. As the Constitution allows, the president, Sergio Mattarella, has the power to appoint someone else, without calling new elections. If the chosen one can convince enough MPs, after Sunday, it is more likely that for the fourth time in a row there will be a non-elected prime minister in Rome.

If that were to happen, the Italian Parliament would once again remind its people of the timeless wisdom of Giuseppe Tomasi di Lampedusa’s wonderful novel, The Leopard. In one of the novel’s most iconic passages, the young Tancredi Falconieri explains to his old uncle Don Fabrizio, Prince of Salina, why their family must pledge allegiance to the new rulers:

“If we want things to stay as they are, things will have to change.”

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