Renzi´s fall and our worries

Italy has known 63 governments since 1945. That´s a lot of instability during a long period of 70 years. And most likely, the current government, led by Matteo Renzi, will fall after this coming Sunday´s referendum. It´s certainly no good news. Particularly at a time when the Italian banking system and the economy require the support of a strong and stable Cabinet.

In Brussels and in the financial centres of Europe most people believe that there will be no negative impact if Renzi falls and becomes just a caretaker Prime Minister. They have basically in mind the European politics and the markets.

But I think they are a bit short-sighted.

First, there will a very serious impact on the internal politics of Italy. That will give an additional chance to the 5-Star Movement and others, including the racist Lega Nord, to gain additional votes and mess up the domestic politics. Second, the banking system is in a far worst situation than we are prepared to accept. Cabinet needs to have full power to be able to adopt the measures that are required to address the banking crisis. Thirdly, the EU would certainly benefit from a stronger leader in Rome. Renzi has not been able to play an active role in European affairs. If he loses, but stays on, as interim leader, his intervention will be even lighter. If he goes, the new leader will be too busy trying to ground himself in the national politics to have time for Brussels.

For these reasons, one should be worried.