We have said this before and we are saying it again – British Pound is safer than Euro currency. If you really want to sell, sell Euro. After Brexit, the European Union has started disintegrating and it’s a matter of time before a total meltdown. Failed to win his referendum, Italian Prime Minister Matteo Renzi has offered to resign but will stay until the country’s budget is approved.

 

The populist and nationalist domino effect is sweeping Europe in a bigger wave after the incredible victory of Donald Trump in America, moving faster than the reform that Europe could make, if there was one to begin with. As France, Netherlands and Germany prepare for the tsunami of the rising anger; Italy’s constitutional referendum results are within expectation.

What actually happens in Italy? On Sunday, Italian citizens voted on constitutional reform, an event more significant than British’s Brexit. PM Matteo Renzi had campaigned for a “yes” victory which would see the removal of Senate’s power. If he had succeeded, new laws proposed would only require the approval of the lower house of parliament.

 

The current Italian system requires approval from both houses. By amending the 1948 constitution, it would slash the upper chamber numbers of the Italian Parliament – the Senate – from 315 to 100, essentially reducing the upper house to merely consultative assembly or even rubber-stamp. Renzi claimed it would make governing Italy easier.

In reality, PM Matteo Renzi wanted more power to be concentrated on himself. Renzi wanted to give the central government more powers at the cost of the regions, something the Italian people weren’t impressed, therefore voted 60% against it. It was a dangerous reform for democratic system that would eventually transform the system to dictatorship.

 

Populist party Five Star Movement (5SM), on the other hand, was championing a “no” vote, justifying that the existing checks and balances should stay as it is. It argued that a “yes” victory would deliver a parliament full of bureaucrats chosen from their parties that, once elected, will just get to satisfy their leader instead of people’s needs.

Fortunately, Italy’s laws were architected in such a way that should there be any move to centralize power, such attempt has to be put to a popular referendum (like the one conducted on Sunday) in a measure designed to safeguard against a return to Mussolini-era fascism. Without this “safety preventive laws” in place, Renzi would have turned himself into a very powerful dictator.

 

And like former British Prime Minister David Cameron, 41-year-old Renzi – Italy’s youngest premier – has gambled his political future on the referendum and said he would resign if a “yes” vote is rejected. Mr. Renzi has repeated Cameron’s mistake, thinking he could tackle the rise of anti-establishment sentiment by making the referendum about him.

Unfortunately, Prime Minister Matteo Renzi’s personal popularity wasn’t enough to save him and now he’s paying the ultimate price for arrogantly assuming he’s bigger than the growing anti-establishment, populist sentiment in Europe. He has overestimated his leadership and underestimated how much Italian people hate his administration and the EU.

 

Italy’s referendum on Sunday which came ahead of elections in Germany, France and the Netherlands next year is putting tremendous pressure on establishment parties in those countries. After the humiliating withdrawal of France’s President Francois Hollande from seeking his second term, the loss of Renzi means two errand boys of Chancellor of Germany Angela Merkel have been routed.

However, the defeat of Mr. Renzi in the referendum was not entirely about the establishment wanting more power for themselves. Italian people took the referendum as an opportunity to protest against his administration’s failure to get Europe to share the burden of the migrant crisis. Just like David Cameron, the powerful but arrogant EU elites weren’t listening to Matteo Renzi.

 

The unemployment rate of between 11.4% and 11.7% for the last 15 months didn’t help Mr. Renzi at all. In the areas with the highest jobless rate the “No” camp won with 65.8%, while the impoverished south also largely voted “No”. EU has been quick to play down the prospect of an Italexit (Italy Exit EU) resulting from the defeat of the referendum.

But clearly the result speaks volumes about rejection of the European Union. The Italian people were frustrated with Brussels and being governed by EU law. The Italian people have voted for populist opposition Five Star Movement instead of Democratic Party, essentially agreeing to a possible referendum on the Euro single currency, and eventually exiting the EU entirely.

 

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December 6th, 2016 by financetwitter

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