Italian assets likely to underperform till referendum

The Italian assets such as the FTMIB stock market are likely to underperform the European peers until the key constitutional referendum on December 4th. Voters are to be asked whether they approve of amending the Italian Constitution to reform the appointment and powers of the Parliament of Italy, as well as the partition of powers of State, Regions, and administrative entities. The bill was first introduced by current Italian Prime Minister Matteo Renzi and was passed with overwhelming majority in the parliament. What makes the referendum more vital than the content of the referendum is due to the fact that Mr. Renzi has bet his political future in this referendum. If he loses the referendum, he would be resigning from office.

With Mr. Renzi gone, there could be a bitter political struggle within the Democratic party, whereas the oppositions would louder their calls for a fresh election, which is not due in Italy until May 2018. As of now, the Democratic party holds a sufficiently large majority in both houses of the parliament but recent local elections have shown a significant increase in support for right-wing, anti-corruption 5-star movement. With a loss in the referendum, Italy could once again plunge into the political chaos seen during the European debt crisis.