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Quitaly or Italeave - What will the Italian referendum mean for the European Union?

PUBLISHED: 12:16 05 December 2016 | UPDATED: 12:16 05 December 2016

Northern League's leader Matteo Salvini smiles at his party's headquarters where he was waiting for the outcome of a constitutional referendum in Milan, Italy. AP Photo/Antonio Calanni

Northern League's leader Matteo Salvini smiles at his party's headquarters where he was waiting for the outcome of a constitutional referendum in Milan, Italy. AP Photo/Antonio Calanni

Copyright 2016 The Associated Press. All rights reserved.

What has happened?

Italian Prime Minister Matteo Renzi speaks during a press conference in Rome. Alessandro Di Meo/ANSA via APItalian Prime Minister Matteo Renzi speaks during a press conference in Rome. Alessandro Di Meo/ANSA via AP

Italy’s prime minister Matteo Renzi has resigned after he was on the losing side of a referendum to reform Italy’s constitution. It was a resounding defeat with 60pc of voters rejecting his proposals. The poll was held to reduce the power of the upper house of parliament in a bid to increase political stability.

Why did people vote against his plans in the referendum?

The yes vote - Si - was backed by parties from the traditional mainstream of Italy’s politics and opponents encouraged people to express their anger against the establishment. Renzi’s pledge to resign meant opposition parties used the vote as a poll about his popularity. His labour reforms have been unpopular, and as in many parts of the eurozone, the economy has been growing very slowly and there is high unemployment.

Anger about the EU and the euro were also vented in the poll.

Who were the opposition?

The anti-establishment Five Star Movement of comedian Beppe Grillo was joined by the far-right Northern League, the socialist Italian Left and the nationalist Brothers of Italy. Media tycoon and former PM Silvio Berlusconi threw his Forza Italia party into the battle for a No vote.

Will there be early elections?

The opposition is now pushing for an early election, but it is thought more likely that Italian President Sergio Mattarella will ask another senior Democrat to lead a caretaker administration until scheduled polls in the spring of 2018. Finance minister Pier Carlo Padoan is favourite to take over. Changes of government without elections are not unusual in Italy, and Renzi himself took power without a public vote by forcing out predecessor Enrico Letta.

What did the markets do?

Turmoil in the single currency zone’s third biggest economy had an immediate impact on the euro, which tumbled to 1.05 US dollars in the wake of Mr Renzi’s announcement of his resignation. Many Italians blame their slow emergence from the 2008 economic crisis on membership of the single currency, and Five Star has been calling for a referendum on a return to the lira.

Commentators are keeping a close eye on Italy’s banks, many of which are burdened by bad debt and may struggle to find refinancing during a period of political uncertainty.

What will the prospect of Italy leaving the EU be called?
Options this morning include Quitaly, Italeave, Italexit, Arriverlexit. But this might be a bit premature. While there are calls for Italy to quit the eurozone, there is no call yet for a referendum in the style of the UK’s summer remain or leave the European Union vote. While Eurosceptic, neither Five Star nor the Northern League have so far advocated withdrawal.

What about the rest of the European Union?

Renzi’s fall comes at a moment of massive instability for the continent, which was already reeling from long-running crises over migration and the single currency when the UK voted for Brexit on June 23.

French National Front leader Marine le Pen has declared that the Italian people had “disavowed the EU”.

There are other elections across the European Union next year. French President Francois Hollande has already said he will not stand in an election in the spring, which is expected to pit the far-right Ms le Pen against the Thatcherite Francois Fillon. The right-wing populist Freedom Party of Geert Wilders is leading polls ahead of the Dutch parliamentary elections in March, and even Germany’s Angela Merkel is facing an upsurge in support for the anti-immigration Alternative for Germany as she seeks re-election in the autumn.

By this time next year it looks likely that Merkel will be one of only a handful of EU leaders left standing out of those who ruled the roost at the start of 2016. And with Donald Trump replacing Barack Obama in the US, the Western world will have undergone a virtually unprecedented shake-up in its highest political ranks.

But is there any hope for the liberals? As Italy was voting No, neighbouring Austria rejected the Eurosceptic candidate of the right-wing Freedom Party, Norbert Hofer, in re-run presidential elections. But the EU-backing new president Alexander Van der Bellen is hardly any more of an “establishment” figure, as Europe’s first nationally-elected head of state from a Green Party.

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