Italian Prime Minister Matteo Renzi said on Tuesday (9 August) it had been a mistake to personalise a referendum, due to be held later this year, in which he originally promised to resign if he failed to convince voters to support the need for constitutional change.
Political uncertainty linked to the vote on proposals Renzi says will bring stability after 70 years of revolving-door government has added to concerns about fragility in the euro zone’s third-largest economy.
“I made a mistake personalising it too much,” Renzi told party supporters at an event in Modena, northern Italy. “This is not one person’s reform, this is the reform Italy needs.”
No government has completed a full term in Italy since World War Two, making it difficult to reform an economy whose debt is second in the euro zone only to Greece’s as a proportion of output, which has itself has sputtered for decades.
Renzi wants to do away with a parliamentary system in which the upper and lower houses have equal powers, effectively abolishing the Senate as an elected chamber and sharply reducing its ability to veto legislation.
The Senate has the ability to bring down governments by withdrawing its confidence and advocates of the reform say the proposed changes will stabilise government and speed up lawmaking.
Opponents fear the removal of democratic checks and balances and over-centralisation of power.
Renzi’s main opponents are the Five Star Movement, which makes its policies, and selects its candidates, through online polls.
“The trouble with amateur politicians is that, while they may have good ideas, they often lack the necessary technical ability, and staying power, to see their ideas through to full and effective implementation,” writes former Irish Prime Minister John Bruton in an opinion piece in the Irish Independent.
Polls have shown the “Yes” and “No” camps almost neck-and-neck, and many voters undecided ahead of the day of reckoning, which will likely fall between October and December this year.
“Reform is necessary for Italy to remain a strong and effective state into the future,” added Bruton. “A rise in the price of fuel, or in international interest rates, could cause a big crisis for the country, unless it proves itself capable of facing up to some very difficult decisions.”
“Failure to do so has the potential to undermine Italy’s position in the euro and its banking system, which could then affect all of Europe.”
Credit ratings agency DBRS cited uncertainty around the referendum when it placed Italy under review last week, raising the prospect of higher funding costs for banks already strangled by €360 billion of bad loans.
Background
In April, the Italian parliament passed a package of constitutional reforms. They were designed to improve the efficiency and stability of the Italian state, and also to reduce the powers of the Italian senate and its ability to bring the government down.
Although the package passed, it did not get the required 66% majority in both houses to come into immediate effect.
The only way the package can come into effect now is if it is approved by the Italian people in a referendum.