As the world's attention remains drawn to recent events in Britain and the US, Europe’s fourth-largest economy may be gearing up for a potentially cataclysmic political transition of its own.
Please, God, not another referendum!
On December 4, Italians will head to the polls to vote in a nationwide referendum, the result of which could determine the country's long-term relationship with the EU.
A 'Yes' vote will see the country adopt a series of constitutional reforms laid out by incumbent Prime Minister Matteo Renzi.
The 41-year-old became Italy's youngest ever leader when he took office three years ago. During this time, Renzi has struggled to implement the economic reforms needed to get Italy's creaking and decaying economy going again.
Unemployment has refused to budge from above the 12% mark, while average incomes have barely risen from where they were when Italy entered the eurozone 15 years ago.
Meanwhile, a bloated and debt-ridden retail banking system finds itself weighed down by €360 billion of non-performing loans (NPLs) issued to small, flailing family-owned companies.
Renzi feels the system is to blame. Unlike the UK with its two (or occasionally three) major political parties, Italy operates a multi-party system whereby small factions must band together in fragile coalitions. It has left Italy with 63 prime ministers since the Second World War.
Renzi's own Partito Democratico must make do with around a quarter of the popular vote, leaving it with limited sway in the country's two parliamentary chambers – the Chamber of Deputies and the Senate – which are responsible for passing laws.
Renzi's proposal is to limit the constitutional powers of the Senate, making it easier for legislation to pass through the Chamber and hopefully paving the way for long overdue economic reforms.
Brexit Mark 2?
Having nailed his colours to the mast, Renzi is widely expected to fall on his sword à la David Cameron and resign should the 'No' campaign prevail.
His doing so would open the door for rival parties to come to take the stage, most notably the anti-establishment Five Star Movement led by former comedian Beppe Grillo.
Grillo, whose party has already won mayoral elections in Rome as well as Turin, has spoken candidly about pulling Italy out of the euro and potentially even the EU. It’s a decision that several other parties are likely to support.
Though drastic, such a move could breathe life back into Italy's manufacturing sector, which remains the lifeblood of the economy.
By swapping the euro for a weaker local currency, Italian exporters would immediately see their competitiveness boosted on the global stage – cheaper goods make it easier to do battle with producers in China and other emerging markets.
Looser ties with Brussels would also allow the government greater freedom to resolve the country’s banking crisis. New EU laws prevent member states from bailing out their country’s banks until bondholders (in this case ordinary citizens) have first borne a significant portion of any losses.
However, for a European community still reeling from the events of this June, an 'Italexit', as it's being dubbed, may prove to be the straw that broke the camel’s back.
The calm before the storm?
Strolling through downtown Siena there are few hints as to what may or may not be about to happen. Yet, nestled amongst the upmarket fashion boutiques lies the headquarters of Banca Monte dei Paschi di Siena, the world's oldest surviving bank and Italy's third-largest commercial lender.
The bank, which has become a symbol of the banking industry crisis, is reportedly holding €47bn in NPLs. It recently agreed to a €5 billion share issue as it battles to shave off some of its debt.
Will Monte dei Paschi customers be praying for a ‘No’ vote on December 4? Whichever way the wind blows Italy (and Europe) is going to have its fair share of losers as well as winners.