12th December 2016

The Italian polls were right…

Italy will vote on Prime Minister Renzi’s political reform plan on Sunday.

We think the plans look like the change Italy needs to its sclerotic political system, particularly the restrictions on the role of the upper house which will give it a role closer to our own House of Lords rather than a second chamber which needs to consent to most legislation. However, by proposing the senate is elected by politicians rather than the people, Renzi has opened the reforms up to criticism that they are anti-democratic.

It looks likely to be a missed opportunity for Italy, at least if polls are to be believed (a dangerous assumption). This is not good news for the Italian economy, as reform will be harder to achieve. We are sceptical of the more hysterical predictions about the consequences of a No vote, however: even if Renzi resigns, Five Star then have to win an election before they can carry out any of their radical policies. The Eurozone is unlikely to be “plunged into crisis” as the tabloids would have us believe.

To read last weeks full Market Commentary, follow the link below.

Market Commentary

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