Italy’s copycat crisis resembles Brexit, to a point. While Europe is still reeling from the effects of the vote for Brexit, there are fears about another referendum coming to another EU economy: Italy.
The country will not be voting on its EU membership, but it will make a decision on Italy’s constitutional reform.
Prime Minister Matteo Renzi believes the reforms, which would simplify and facilitate the laws, are long overdue. They should put an end to decades of notorious “revolving door” governments. Italian analysts see this vote as a referendum on the Italian government, and it could turn into a hot potato for Renzi, leading to his dismissal, similar to what the UK has done to David Cameron.
To complicate matters further, Italy has big banking problems. Italian banks have $40 billion in bad loans burden, one-third of the EU total. Although these problems precede the arrival of Renzi’s government, they have become explosive after several bank clients committed suicide. The wave of suicides happened because many banks crashed.
Political experts warn that because of multiple problems, such as high unemployment, stunted economic growth, and shaky banking system, Italy is headed for a major crisis. The anti-government sentiment on the rise could mean the end for Renzi’s government.
The prime minister made repeated statements that he would step down if the referendum fails. The potential for destabilization causes much anxiety in European capitals. The 5 Star Movement is most likely to benefit from a referendum failure.
The movement had started seven years ago, out of a satirical blog, by 67-year-old comedian Beppe Grillo. It won 19 of 20 cities in the Locals. Experts believe this extremist formation success stems from popular anger with political elites, insecurities over economic growth, and the unwanted immigrants.
Grillo, head of the 5 Star Movement, applauded Brexit as a “lesson in democracy”, and he supports Le Pen’s National Front from France and other right wing groups. Grillo also vowed to force an Italian referendum questioning Italy’s EU membership and touting a return of the Italian currency – the Lira.
As German Economist Wolfgang Munchau wrote, this would have a devastating result: An Italian exit from the Euro market would trigger the collapse of the Eurozone in a short period. Could Italy’s copycat crisis mean the end of the European Union?
Image Source – Wikipedia