Italian vote keeps euro zone on edge

PM Renzi, seen here with his wife Agnese, casting his vote for constitutional reform. He has vowed to step down if his proposals to streamline Italy's 68-year-old parliamentary system were voted down.
PM Renzi, seen here with his wife Agnese, casting his vote for constitutional reform. He has vowed to step down if his proposals to streamline Italy's 68-year-old parliamentary system were voted down.PHOTO: REUTERS

Opposition win - which is expected - could hurt country's battered banks, spark EU crisis

ROME • Financial markets and Europe's politicians fear a likely victory for the opposition camp today in a referendum on constitutional reform that could renew turmoil for Italy's battered banks, pushing the euro zone towards a fresh crisis.

Polls opened yesterday, with about 51 million Italians eligible to vote on Prime Minister Matteo Renzi's plan to drastically reduce the role of the upper house Senate and claw back powers from regional authorities.

Market jitters have concentrated on Italy's banks, saddled with €360 billion (S$544 billion) of bad loans, and most specifically on Monte Dei Paschi di Siena, its oldest and third largest lender.

The bank needs to raise €5 billion by the end of the year to plug a capital shortfall or risk being wound down.

The outcome of the vote was anxiously watched in capitals across Europe, as Mr Renzi has vowed to step down if his proposals to streamline Italy's 68-year-old parliamentary system were voted down.

Turnout, expected at between 50 and 60 per cent, could be crucial. Pollsters say lower participation could favour Mr Renzi, as hostility to his reform is strongest among young voters and those in the poor south, segments of the population that often do not bother to vote.

His resignation would usher in a period of political uncertainty and potential economic turmoil for the country and its European Union allies.

With all the opposition parties lined up against the reform, a victory for Mr Renzi would be a surprise and represent an enormous personal triumph for Italy's youngest prime minister who often appeared to be fighting the campaign single-handed.

All surveys published in the month before a blackout was imposed on Nov 18 put the "No" camp ahead.

Private polls have continued to be conducted in the last two weeks and bookmakers say "No" remains the clear favourite to win.

However, in the final days of frenetic campaigning, Mr Renzi insisted that public mood was changing, focusing his attention on the millions of Italians who said they were undecided.

Mr Pippo Nicosia, a stallholder at Campo dei Fiori market in central Rome, said he would vote "Yes" but had no doubt about the result.

"'No' will win, everything will collapse so we might as well all go on holiday," he said.

Turnout, expected at between 50 and 60 per cent, could be crucial. Pollsters say lower participation could favour Mr Renzi, as hostility to his reform is strongest among young voters and those in the poor south, segments of the population that often do not bother to vote.

Bookmakers' odds suggested a roughly 75 per cent chance of a win for "No".

Results of the vote will be out this morning Singapore time.

If Mr Renzi wins, it will mean a new mandate to pursue reforms he sees as key to unshackling Italy's creativity from the influence of a self-serving political caste that has exploited institutional weakness to stymie change.

"If we miss this chance, it won't come back for 20 years," he warned voters last week.

REUTERS, AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on December 05, 2016, with the headline 'Italian vote keeps euro zone on edge'. Print Edition | Subscribe