After a resounding loss at the polls for his constitutional reforms package on Sunday, Italy’s Prime Minister Matteo Renzi has announced his intention to resign.
It has thrown the country into renewed political turmoil, with the prospect of a sixth prime minister in a decade, and has prompted frenzied talk of the country’s future in the European Union.
What happens now?
Technically Renzi still leads the government. But Italy’s president, Sergio Mattarella, is the man calling the plays on how the political situation will unfold in the coming days.
The 75-year-old head of state has two options: accept Renzi’s resignation; or reject his offer to step down, telling him to reshape his cabinet and prioritize completing his mandate. While a more improbable situation, the president may ask him to remain in his role until a budget bill has been approved on December 23. If Renzi is asked to stay on, he would have to seek a vote of confidence from parliament.
The more likely scenario is that Mattarella will order the formation of a caretaker government led by a member of Renzi’s cabinet or a technocrat (someone with appropriate experience in government but not a politician).
Wolfango Piccoli, director of research at Teneo Intelligence, says impact on Italy’s financial markets will play a part. Reaction so far has been fairly mild but should the prospect of instability in the eurozone’s third-biggest economy move the markets significantly, he suggests the front-runner is Finance Minister Pier Carlo Padoan, a close ally of President Matterella who is largely respected by investors.
“But the problem with him is that he will be seen as a continuity and that will spark further criticism from the [anti-establishment] Five Star Movement, Berlusconi and so on,” he told CNN. “If not Padoan, it could either be an institutional figure — think about a former judge of the constitutional court, a safe pair of hands, or the speaker of the Senate, Pietro Grasso.”
He added: “But at the end of the day, the name itself is not going to make a huge difference — this is going to be a short-lived caretaker government with a very narrow mandate.”
As it stands, the next general election is scheduled to take place in 2018. It remains unclear if the interim government would wait and finish out the end of the parliamentary term or go to the polls earlier.
Who benefits?
Following the “no” vote victory, opposition parties have called for a dissolution of parliament and snap elections, but this would be an unlikely series of events.
Piccoli says “a coterie of anti-establishment parties” could stand to gain from the “no” votes win with the most notable being M5S and LN as well as another small extreme right-wing party called Fratelli d’Italia (Brothers of Italy).
Last year an electoral law, intended to build more stable governments, was passed which would give extra seats in parliament to any party receiving votes of 40% or more. However, there is a constitutional court ruling pending on this.
Mainstream establishment parties will want a rewrite on this bill prior to any early elections in an effort to prevent far-right populist parties from making any significant gains in power.
“Electoral law will be used to somewhat defuse the risk of a Five Star Movement victory in the next election,” says Piccoli.
“[These calls are] more about the claims that they won yesterday and that it is a major defeat for Renzi so the next step is an early election. But we know that early election won’t happen until electoral system is changed and this will take months, not weeks.”
Is Italy more likely to leave the EU?
Whatever shorthand word the media settles on — Itexit, Quitaly or Italexit — the stage is slowly being set for a battle over Italy’s place in the European Union. Far-right parties operating in Italy, such as the Five Star Movement party (M5S) and the Northern League (LN), will want to capitalize on the momentum of a “no” referendum victory, and call for Italy’s exit from the eurozone repeatedly in the coming months.
And while Renzi’s reforms proposal loss hands Italy’s EU skeptics a stronger mandate, it’s not yet enough, says Piccoli, director of research at Teneo Intelligence.
“This was a vote against Renzi so it shouldn’t be read as a vote against the euro, against the establishment,” he tells CNN. “It is clear that the alarm bells have gone off in Italy now … There is going to be a certain sense of alarmism but this is not a vote that will necessarily change the projection of Italy in the short term.”
The result will certainly embolden Italy’s two important opposition movements, M5S and NL, which are both explicitly euroskeptic, explains Chris Bickerton, a lecturer at Cambridge University and author of “The European Union: A Citizen’s Guide.” But actually tabling a vote on Italy’s inclusion in the eurozone is still a long way off.
“It’s pretty far-fetched as an immediate possibly,” he told CNN. Instead, Bickerton says, people in Italy are now much more open to voting for parties which themselves run on a much more euroskeptic platform.
“It’s a country that for so long has been one of the most enthusiastic countries for European integration. But I think over the last ten years you’d have to say that that has changed.”
Meanwhile he says suggestions the referendum could ultimately lead to Italy’s exit from the EU are, at this point, “exaggerated.”
“What [the result] does tell us … is that a lot of people in Italy lost any sort of faith they put in Renzi as a reforming new figure in Italian politics,” explains Bickerton. “Since Italy joined the euro in 1999 it simply hasn’t grown on average. It’s had an average growth rate of zero so people do put two and two together and think this suggests that its place within the Eurozone is not a very good idea.”
He adds: “Going from there to actually working out the mechanics of getting a referendum to leave the euro is something else. There is a climate in Italy of growing euroskepticism and certainly anti-establishment feeling — that’s very clear. The implications for the EU specifically, I think, are probably less clear.”