Italian referendum

Posted: November 23, 2016 in Uncategorized

With Italy, it starts the scary year for Europe, probably from next week (this week is Thanksgiving, so the US is half asleep).

We say there is no three without two…and we had two (Brexit and Trump).

The Italian referendum is quite complex (practically it is asking the people to increase the power of the central Government), but practically is a YES or NO on PM Renzi.

The polls this time give a win to the NO and a fall of Government and this is indicated also in the Italian stock exchange performance and Italian bond yields.

No it is probable, but Italy allows also Italian citizen living abroad to vote and this factor has been an incognito factor in a few voting rounds.

A fall in Government, taking it literally, would take us to a new election. At this point in time an election could lead a win of the anti-Euro party M 5 Stars hich wants to renegotiate the agreement with the EU and do an ITALEXIT referendum.

Most likely, the governing party will resign, but try to appoint a technical government (so a government guided by an independent – for example a previous Bank of Italy chairman) until the mandated election 2018.

So the referendum probably could be a bit of scary moment, but not an “Eurexit” moment- if the technical Government is elected. Actually this result will push the European Central Bank to keep its Quantitative Easing with devaluation effects on the Euro and rally for the market.

If PM Renzi wins the market will shrug the event.




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