Italians called to confirm or reject Prime Minister Matteo Renzi’s constitutional reform on December 4 may be under the impression that they are participating in a plebiscite on the popularity of their young, bold, over-confident leader. To be sure, an unnecessarily heated, confused and ultimately misleading electoral campaign has spread that feeling. Arguably, however, the political fate of Renzi will not be sealed on December 4. The consequences of Italians rejecting his reform, on the other hand, may well prove dire for the country, and for the exceptionally fragile and disoriented EU of today.
Italians like to praise their constitution, a remarkable compromise document drafted by political forces that had been fighting on the same front – although not necessarily together – in the civil war that engulfed the country in the last phase of World War Two. There is little doubt, however, that the post-war institutional system – focusing first and foremost on preventing the emergence of a strong Executive – has aged considerably. Over the past few decades, moreover, it has undermined Italy’s capacity to effectively engage with its long-standing structural problems, and to play a more effective role on the European and international stage.
Italy today is the sole European country where the Executive needs to hold a majority in both Houses of Parliament to function. It is the sole European country where the two Houses of Parliament have equal power in the legislative process, making it mandatory for every single piece of legislation to be approved by both Houses in the exact same text. Not surprisingly, Italy has been long characterized by fragile, short-lived governments and by a perennially clogged legislative process incapable of reforming itself.
PM Renzi’s constitutional reform – flawed as it may be – directly addresses this problem. It reduces the status of the Upper House – the Senate – to that of a consultative body representing regions at the national level, and limiting its involvement in the legislative process to a few issues. Combined with an electoral reform guaranteeing control of the House of Representatives to the largest political party, moreover, it tips the balance between Executive and Legislative in favor of the former.
While constitutional reform may not be the most pressing problem facing Italy today – as The Economist has recently pointed out – the simplification of the legislative process is a necessary step to make further reform possible. PM Renzi’s 2015 labor market reform – the so-called Jobs Act – has started addressing some of the sources of Italy’s economic malaise. The rejection of the constitutional reform would likely derail the government’s reform plans, proving once more that structural change in Italy is an impossible business. Furthermore, Renzi’s defeat in the referendum, a report by the Bank of Italy recently warned, would leave Italy exposed to turbulence and volatility on the international financial markets, with dire consequences for the country’s weak economy, and the stability of its fragile banking system.
A recent analysis by Alberto Alesina of Harvard and Francesco Giavazzi of Bocconi visualizes in one single figure the urgency of continued structural reform, and the risks associated with Renzi’s defeat in the referendum. It shows how Italy’s labor productivity has been stagnating, growing by a mere 5 percent over the past twenty years compared to a 40 percent increase in the United States, 30 percent in France, Germany and Britain, 25 percent in Portugal and 15 percent in Spain. A sclerotic labor market, over-inflated public sector and fragile banking system have crippled Italy’s growth. An industrial sector still anchored to traditional family-owned enterprises has largely missed the opportunities provided by the technological revolution of the 2000s, losing competitiveness on the European and global scene. Under-developed human capital remains an issue, with Italy ranking low in Europe both in terms of youth graduating from college and, critically, in terms of students graduating in technical and scientific disciplines.
Given this gloomy picture, Italy’s rejection of the constitutional reform – and the weakening of PM Renzi’s position – would look like a historic missed opportunity. In the context of today’s shaky Europe – mired in pre-Brexit angst and faced with a long electoral cycle in France and Germany – it would look like a further weakening of the Union’s capacity to deal with historic challenges such as the lingering Eurozone crisis, the deteriorating security environment from the Mediterranean to Eastern Europe, and the continuing inflow of migrants from the Middle East and Africa.
But while the rejection of the constitutional reform would considerably undermine Italy’s capacity to tackle its own structural problems (and those of the European Union), its effects on Renzi’s political career may well be less destructive. His control on the center-left Democratic Party looks strong, particularly since the internal opposition has cornered itself in a sterile personal struggle against the leader. On the opposite end of the political spectrum, the twilight of tycoon-turned-politician Berlusconi has left the center-right in ruins. The rise of populist movements has not yet lead to the creation of viable alternatives to Renzi. The Northern League – a movement formerly mobilizing on a federalist agenda – has lost focus, morphing into a nationalist, anti-immigrant party with ties with Marine Le Pen’s Front Nationale in France. The populist Euro-skeptic Five Star Movement has been losing momentum after failing its first real test governing a big city with the inexperienced mayor of Rome, Virginia Raggi.
In this context, a defeated Renzi would likely decide to resign from office after the referendum. He would thus be positioned to nominate his successor (likely a technocrat, or the Speaker of one of the Houses of Parliament) and prepare for an electoral campaign in 2017, which he would likely win. The momentum for reform, however, would be lost in the process – probably for a long time. Similarly lost would be a historic opportunity to influence European politics in a crucial phase of the history of the EU, and to play a more pro-active role on the international scene.
PM Renzi would likely survive a loss in the December 4 referendum. The Italy he would likely go back to rule in 2017, nonetheless, would have missed yet another opportunity to disentangle itself from a long declining phase, and to give its limited – yet crucial – contribution to a more stable, cohesive, forward-looking Europe.
