Italy’s referendum vote: implications for italy

TD Economics

Italy’s referendum vote: implications for italy and the global economy


  • Italy is set to hold a referendum on December 4th which seeks the public’s approval of a series of constitutional reforms expected to reduce legislative gridlock by diminishing the legislative authority of the Senate. Final polls indicate that the “no side” will prevail.
  • A yes vote would have few implications for our outlook for the Italian economy and financial markets. However, a rejection of the constitutional reforms could give rise to a bout of financial market volatility, with tightening of Italian financial conditions likely to drag on Italian growth next year.
  • A no vote is unlikely to have material implications on our global growth outlook. Rather, it raises the chance of some of the downside risks to growth being realized.

The Italian referendum this upcoming Sunday has the potential to stoke another bout of volatility in global financial markets. Given pro-EU Prime Ministers Matteo Renzi’s threat to resign in the case of a vote to reject the proposed constitutional reforms, the outcome would set the stage for a period of heightened political uncertainty in a core member of the euro-zone that has extensive trade and financial linkages in Europe and abroad. While the Italian economy has historically had to deal with regular spells of political uncertainty, the difference this time is that Prime Minister Renzi’s resignation opens the door a little wider for populist, anti-EU movements to have a greater voice in Italian politics in elections either next year or in 2018.

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