A selection of experts answer a new question from Judy Dempsey on the foreign and security policy challenges shaping Europe’s role in the world.

 

Federiga BindiSenior fellow at the School of Advanced International Studies at Johns Hopkins University, director of the Foreign Policy Initiative at the Institute for Women’s Policy Research, and D. German distinguished visiting chair at Appalachian State University

Why are observers always asking whether Italy can be saved? The European continent is plagued by increasingly authoritarian regimes: Hungary, Poland, Russia, Turkey, and others. The UK voted to leave the EU but has no clue how to manage the process. In the United States, a majority of voters cast their ballots for Hillary Clinton, yet the country’s electoral rules gave the presidency to Donald Trump. The Middle East is in flames, and the problem is how to salvage Italy?

Italy will continue to muddle through with a mix of resilience and creativity. Italians will keep believing every successive leader who promises change in a country where—as Giuseppe Tomasi di Lampedusa wrote over a century ago—everything has to change for nothing to really change. With or without Prime Minister Matteo Renzi, Armageddon is not going to come from Italy, even in the unlikely case that Italians reject the constitutional reforms proposed in the December 4 referendum. Although polls suggest the no campaign is currently in the lead, it would be surprising if the reforms did not pass, given the government’s massive efforts and a number of variables unrelated to the content of the referendum.

The real problems in Europe are coming from Albion, not from Rome.

 

Lorenzo CodognoVisiting professor in practice at the European Institute of the London School of Economics

On December 4, Italian voters will be asked whether they approve of reforms to the Italian constitution that would change the appointment and powers of the parliament and the way laws are made.

A yes vote would strengthen Italian Prime Minister Matteo Renzi’s position in his Democratic Party and increase its chances of victory at the next parliamentary election in spring 2018 or earlier. The year 2017 will be a lost year for reforms and fiscal consolidation because of its proximity to the next election, but reforms will have a chance after the vote if Renzi wins.

If the no camp triumphs on December 4, Renzi will likely resign, but the president will probably ask him to appear before the parliament to see whether a majority of lawmakers still support his government. Risks of prolonged political instability are low, and the alternative to the current center-left majority would be a so-called grand coalition of center-left and center-right.

Political developments after the referendum are crucial for the stability of financial markets. A restructuring plan by Italian lender Banca Monte dei Paschi could, if it fails, become the catalyst for a full-fledged banking crisis or, if it goes well, accelerate the healing of Italy’s sickly banking sector. The success of the Monte dei Paschi operation would provide a positive backdrop for all capital increases by other banks. Political and financial stability go hand in hand.

 

Silvia FrancesconHead of the Rome Office of the European Council on Foreign Relations

Italy’s December 4 constitutional referendum is a crucial test for Prime Minister Matteo Renzi’s government and for Italy’s stability. The referendum has to do with the country’s capacity to reform, to go beyond an obstructive and obsolete system that gives both chambers of parliament equal powers, and to attract foreign investment—in other words, to move ahead. If the yes campaign wins, there are hopes for Italy’s salvation and for progress on reforming the country.

The reforms are Renzi’s electoral flagship and go beyond their technical aspects. After his Democratic Party won 41 percent of the vote in the 2014 European Parliament election, Renzi publicly stated that he would resign if he lost the referendum. That united the opposition against him and turned the vote into a political issue.

The referendum is a great opportunity for the Italian parliamentary system to make a leap forward to a more efficient and cost-effective lawmaking process after decades with no substantial progress. If Italy fails to take the route of systemic reforms, the slippery slope toward political instability and economic uncertainty may become a concrete possibility.

 

Gianni RiottaMember of the Council on Foreign Relations

Do Italians want to be salvaged, or have they decided on a course of elegant, melancholic decline?

Italy neutered all historical parties—Christian democrats, socialists, and communists, even neofascists—twenty-five years ago. That seemed like a restart, but voters elected Silvio Berlusconi as prime minister in 1994, 2001, and 2008 and effectively bestowed on him a veto power in the inconclusive 2013 election. Twice Romano Prodi led the center-left to power, in 1996 and 2006, only to be defeated by leftist squabbles. Technocratic premier Mario Monti was the savior in 2011, before being dismissed as soon as he proposed hard reforms. Enrico Letta, bright and educated, seemed the wonkish solution but lasted just a few months before Matteo Renzi took the helm.

Maverick, young, and a sassy communicator, Renzi rode to an unprecedented 41 percent of the vote for his Democratic Party in the 2014 European Parliament election. He seemed ready to unify the country—at least, until he too tried his hand at reforms. Immediately, a spurious coalition, from Italy’s tricolor-brandishing version of the U.S. alt-right to Beppe Grillo’s populist Five Star Movement, set out to stop him.

Should the no camp win Italy’s December 4 constitutional referendum, Renzi looks all but finished. The country may toy with an interim cabinet while Grillo eyes the premiership. Will Renzi, with his Houdini-esque brilliance, turn the tables and look for a centrist strategy? He may, but how long will it be before the self-destroying attitude of my fellow Italians kicks in again?

 

Luigi ScazzieriClara Marina O’Donnell fellow at the Center for European Reform

Probably not, but Italy’s future does not hinge on Prime Minister Matteo Renzi. If he wins the constitutional referendum on December 4, he will gain political capital and be in a stronger position to pursue domestic reforms and push for fiscal stimulus across the eurozone. However, Italians look set to reject the reforms, and Renzi will probably resign.

Renzi’s resignation and the rejection of the constitutional changes are unlikely to plunge Italy into instability or throw it off the current path of incremental reform. A snap election is improbable: a new government would be cobbled together from mainstream parties and steer the country toward elections in late 2017 or early 2018. The new government would continue to pursue the stony path of gradual economic reform pursued not only by Renzi but also by his predecessors Enrico Letta and Mario Monti, while pushing for more expansionary fiscal policies at the European level.

Past the next election, Italy’s political and economic stability will depend on developments at the European level as much as on domestic politics. However, a victory of the Euroskeptic Five Star Movement is unlikely: the Italian electoral system makes it very difficult for a single party to gain a majority in both houses of parliament.