21 July 2016

Why the Italian Constitutional Referendum affects the future of the EU


As Britain begins to accept that, under the leadership of Theresa May, Brexit will in fact happen, galvanised Eurosceptics across the EU have intensified their campaigns in a frenzy to follow suit, and calls for further referenda are floated every other day. Yet, as it stands, Italy could never be the next to leave the EU by popular mandate. And this is not because Italian Eurosceptics lack political force – the anti-EU, anti-Euro 5 Star Movement (M5S) is Italy’s second biggest party and effective opposition to the government – but, simply, because a Brexit-style referendum would not be legal. The Italian Constitution does not contemplate non-abrogative referendums, of the kind that involve the people deciding on the introduction of new laws, or the change of international treaties. Yet, this might soon change.

The introduction of this kind of referendum is but one of the many fundamental changes to the Constitution that Italians will vote on in October. Strongly advocated by Prime Minister Matteo Renzi and his political allies, the Constitutional Referendum will be held to approve or reject the so-called ‘Renzi-Boschi Reform’, which aims to reduce the costs and improve the working of the sluggish Italian political apparatus. Important points include changes to the Corte Costituzionale – the Supreme Court – which will scrutinise proposed reforms, and the introduction of time limits for discussion on new bills. The main propositions, however, concern the annulment of the bi-cameral parliamentary system that has been at the foundation of the Italian legislation since the creation of the Republic. Since their formation, both parliamentary chambers have had equal status and responsibilities. With the Constitutional Referendum, the Senato (the higher chamber formed of 315 Senators elected regionally) is set to lose most of its legislative power. Instead, it will be at the discretion of members of the Camera (the lower chamber) to accept Senators’ changes on proposed laws. Furthermore, the number of Senators will be reduced to 100, of which 95 will be elected from regional councils and mayoralties and five appointed by the Prime Minister.

A Constitutional Referendum of this kind does not come out of the blue. The popular discontent with the Italian political class has been growing, and the cost of the gargantuan Italian bureaucratic apparatus was in the spotlight long before the populist party Movimento 5 Stelle (5 Star Movement) made this a key point of its manifesto. Despite cropping up in the news every couple of months, the absenteeism, extravagant expense claims and lifelong ‘golden pensions’ of Senators have, until now, remained untouched. An efficient and economical reorganisation of the political system is long overdue.

Nonetheless, much like the EU referendum in Britain was hijacked by misleading rhetoric, the campaign for the Constitutional Referendum in Italy has taken a nasty turn that could cost Mr. Renzi his post and plunge Europe in even hotter waters. In fact, the PM has somewhat recklessly declared he will resign if his reform doesn’t pass, and since then the referendum has been framed as a popular vote of confidence in his government. It doesn’t help that Renzi is the third unelected prime minister of Italy since 2013, and rules with a dangerously thin majority. The previous leader of his own party has joined the opposition, and the government has had to sign more and more dubious alliances over the past few months. Despite his boisterous confidence, Mr. Renzi desperately needs citizens’ validation.

Yet the scepticism runs high, and recent polls are showing the ‘No’ vote at a 4% lead. There are three explanations for this. First, despite being relatively recent – it was signed only 70 years ago – the Italian constitution bears an aura of sacredness for its historical significance, as its publication marked the end of Mussolini’s fascist regime and of the birth of the Republic of Italy. Second, as corruption scandals involving local authorities surface almost daily, there is little enthusiasm to grant further parliamentary privileges to regional councillors and mayors by admitting them to the Senate. Third, the government’s failure to produce effective reforms of the electoral systems so far have deeply alienated voters.

Against the backdrop of traditionalist attachment to Italy’s democratic institutions and frustration with insufficient reforms, Mr. Renzi’s chances of success looked meagre before Brexit, and the result of the British referendum did not do him any favours, as the Economist reported last week. Amidst the post-Brexit financial meltdown, the already-fragile Italian banks took a very serious hit. As panic spreads, one bank, Monte dei Paschi di Siena – the oldest in the world – seems on the brink of going under. Having accumulated hundred thousand billions of euros in bad debt since 2008, the bank needs massive recapitalization, as fast as possible. If it were to fail, thousands of investors – many of whom are small entrepreneurs and pensioners – would lose everything.

This would be, to put it lightly, not very good PR for Mr. Renzi, just as the referendum approaches. However, tightened EU rules mean that member states have very limited capacity for rescuing failing enterprises of such kind. If Monte dei Paschi is allowed to fail, Mr. Renzi will not be the only one to take the blame: the EU will take its fair share too. At that point, assuming that an understandably angry electorate will vote against Renzi’s reforms in the referendum, the PM will have to resign – leaving the Movimento 5 Stelle with an unmissable opportunity to play along with the intensified Euroscepticism of the Italian electorate. Having seized power and parliamentary majority, it will be easy for the Movimento 5 Stelle to exploit its populist appeal and pass some crowd-pleasing constitutional reforms, with the promise of holding a British-style referendum, and then, who knows? Maybe #outaly could be on the horizon.

I admit that this is a somewhat apocalyptic scenario. However, given the latest political developments in Britain I am taking nothing for granted. It is true, though, that neither Mr. Renzi nor the EU can allow for Italy, one of the EU’s founding members, to even risk to follow Britain’s path. It might be time for the European Commission to swallow its pride and, for once, allow one Head of State to bring something home from negotiations – namely, allowing Renzi to draw from Italy’s finances to save the country’s banks. As far as it is concerned, the EU might not care if Italians find themselves with a fourth PM in four years, but if losing the constitutional referendum means abandoning another country to Eurosceptic populism, the commissioners might want to reconsider their priorities. The EU has already underestimated one referendum – but has it really learned its lesson?

Beatrice Faleri is Senior Editor of Perspectives at King’s College London.