Italy may be the next country to leave the European Union following the United Kingdom’s historic vote last week to exit the 28-country group.
“The next referendum to be held in the EU takes place in Italy in October,” Wolfgang Munchau, co-founder and director of Eurointelligence, writes in the Financial Times
. “It is not about the union but about Matteo Renzi’s constitutional reforms. The Italian prime minister is taking a gamble which is no less risky than David Cameron did.”
U.K. voters approved the measure to break from the EU with a vote of 51.9 percent, sparking worries that the eurozone would dissolve under the weight of austerity measures, weak economic growth and an immigration crisis triggered by the civil war in Syria.
Munchau says the Brexit has three troubling implications for Italy:
- Italy’s economy may revert to less than 1 percent growth or even recession.
- Italian banks don’t have enough cash to weather a major economic storm.
- More nationalist, anti-EU fervor in Italy that would show up in possible elections in 2017.
“The political dynamic in Italy is not much different from the one in the UK,” Munchau writes. “he electorate is in an insurrectionary mood. The country has had virtually no productivity growth since it joined the euro in 1999. The Italian political establishment has until recently been as dismissive of its chances of losing the referendum as the British establishment was until Friday morning.”
Italy is looking at the possibility of providing its banks with more money to cope with bad loans and the fallout from the Brexit.
“The government is weighing measures that may add as much as 40 billion euros ($44 billion),” reports Bloomberg News
, citing a person who asked to be unnamed because the talks are private.
Italy’s government is struggling to stabilize a financial system, hurt by 360 billion euros of non-performing loans, sluggish economic growth and record-low interest rates after an earlier attempt to set up a bad bank with public funds met with resistance from the EU, according to the newswire.
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