Italian referendum: Outcome is of high importance for the economy - Danske Bank

According to analysts from Danske Bank, the outcome of the Italian referendum is of high importance for the Italian economy and European market sentiment.

Key Quotes: 

“On 4 December, Italians are set to vote on the constitutional reform proposed by Prime Minister Matteo Renzi. The aim of the constitutional reform is to bring political stability to Italy by diluting the power of the senate and the regions, thus empowering the government.”

“The referendum has more aspects than the constitutional bill – not least with increasing EU scepticism and following the UK’s Brexit vote and Donald Trump winning the US election. Originally, Renzi announced that he would step down if he loses the vote but later members of the coalition said the government would stay in place. Over the weekend, Renzi’s resignation seemed to be confirmed in the case of a ‘No’ vote, as he said the government would fall if he loses the referendum.”

“Polls from the end of October suggest the referendum is likely to be rejected by around 52% ‘No’ votes on average but some polls suggest up to 50% of the population has not decided. Observers note that the referendum has become a way for the population to express discontent with Renzi’s government, the 2017 budget and growth initiatives.”

“The outcome of the referendum is of high importance for the Italian economy and European market sentiment. If accepted, the bill could boost confidence in the recovery of the Italian economy, create political stability and reduce uncertainty about the future of the euro area. Italy has been one of the worst performers since the financial crisis.”

“The political uncertainty that arises around the future of Renzi’s government could hurt market sentiment as the influence of the Five Star Movement could increase. The Italian population is already among the most sceptical regarding the euro.”