Renzi’s High Stakes Poker: Europe Holds Its Breath Ahead of Italian Vote

30-Nov (DerSpiegel) — Italian Prime Minister Matteo Renzi may be facing defeat in a game of high-stakes poker with the electorate. If the Dec. 4 constitutional referendum fails, there are dark clouds on the horizon for Europe’s future. The country is in poor economic shape and financial markets are alarmed.

…If the government were to fall, it would hit highly indebted Italy, a core EU member state, at a sensitive time. The Italian central bank in Rome has already registered a “strong increase in uncertainty” on financial markets. The risk premium on Italian sovereign bonds relative to the interest rate Germany must pay its creditors has doubled since the beginning of the year, as trust in Italy had declined among investors. Economists like Nobel laureate Joseph Stiglitz and Germany’s Hans-Werner Sinn are already speculating over the possibility Italy will leave the eurozone.

…If Italy, the third-largest economy in the currency union, were to leave, it would mean doom not only for the euro. It could put the entire European Union at risk.

[source]

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