Though not technically another Brexit, Italy may start a political crisis that causes the country’s departure or hurts the E.U. in some other way.
NPR reports on another referendum and compares it to another Brexit even though Italy isn’t yet voting to leave the E.U.
It won’t be a vote on whether to remain or leave the European Union, but on Italy’s constitutional reform package. Italian Prime Minister Matteo Renzi says the reforms — which would simplify and accelerate the passage of laws — are long overdue and will finally bring an end to decades of his country’s notorious revolving-door governments.
But Italian analysts say the October vote could turn into a referendum on the Italian government itself — and could prove as much of a boomerang for Renzi, who has been prime minister for 2 1/2 years, as the U.K. referendum has been for David Cameron.
Complicating matters further are Italy’s banking problems. Italy’s banks are burdened by $400 billion in bad loans, one-third the eurozone total.
There’s a segment below on the Italian economic crisis, beginning at 13:26. The government is not paying companies what the government owes them, and they in turn can’t repay banks.
Mish writes about how Italy’s banking crisis may unleash a crisis of authority in the E.U.
Brussels has rules on budget deficits, widely ignored by Spain, France, Greece, and historically even by Germany.
Brussels also has new rules on bank bailouts. Four times Brussels refused Italian Prime Minister Matteo Renzi’s request for a state sponsored bailout of Italian banks because it’s against the rules.
Renzi threatens to go ahead anyway. And if he does, who can stop him?
The E.U. wants countries to take from depositors to bail out banks—called a “bail in.” But that would (understandably) risk Renzi’s government and perhaps cause Italy to exit the E.U.
Renzi is now prepared to defy Merkel. And Beppe Grillo, Italy’s Eurosceptic Five Star Movement leader stands on deck, ready to replace Renzi if depositors are bailed in.
For such an allegedly great institution, the E.U. seems strangely fragile.