Italian Constitutional Referendum Will Weigh On Markets

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Summary

Italy's Constitutional referendum vote will occur Sunday December 4.

Prime Minister Renzi's government is tilting on the outcome.

A no vote has future implications for a banking crisis, an exit from the EU and a failed EU in the offing.

Watch the market reaction Monday morning and beyond.

Referendum

The referendum, introduced by Italian Prime Minister, Matteo Renzi, and his left of center Democratic Party, has divided the Italian citizenry. Renzi has promised to resign if the vote is no.

Let's Oust Renzi Opposition Demonstration

Italy's Brexit

On Sunday, December 4, Italy will vote yes or no on a referendum that can have grave consequences for Italy and the EU. The referendum proposes to change Italy's constitution by cutting the number of senators from 315 to 100 and removing the Senate's right to hold votes of no confidence in the government. This will eliminate some of the checks and balances enacted after World War II.

A yes vote increases government power and critics say it could create an obstructionist Senate.

A no vote might trigger a crisis for Italy's debt-laden banks. There is possible contagion to other weak European banks. Stress testing showed 25 of 51 that failed.

There are political forces in Italy, post Brexit, that are arguing in favor of:

  • Exiting the Euro
  • Exiting the EU

Italy is the sixth largest economy in Europe and a "No Vote" may be an initial shot that could lead to Italy's exit. The political game is afoot and poses a potential threat to the EU and the entire globalization movement.

Take Away

The results of this vote will likely be felt in the global market-place Monday morning, and beyond. The U.S. markets were quiet at Friday's close anticipating the upcoming event as investors watch closely.

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