• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

James Bevan: Stakes high as Euroland faces five star disruption

0
  • by James Bevan
  • in Blogs · James Bevan
  • — 24 Nov, 2016

The perceived threat is that the pro-European Union party in power under Mr Renzi’s wing will be outflanked by the populist Five Star Movement (M5S), which favours exiting the euro. If that were to happen, Euroland could fall apart.

Whilst there are many who are focused on the Chancellor’s Autumn Statement, the next big event to influence markets will be on December 4th when Italians will vote on a referendum that could destabilize the Euro project, or at least contribute to the wave of global populism reflected by the Brexit and Trump votes.

Many don’t understand what the vote is on, and put simply it is about attempting to achieve a decisive process for decision taking in Italian politics. At present Italy has what is described in textbooks as a “perfect” bicameral system, with two chambers that hold the same level of power as the other, which often leads to gridlock. With the referendum in force, one of the chambers will have less power. The Senate would be reduced from 315 elected politicians and six lifetime appointees to just 100 seats. It would include 74 regional councillors, 21 majors, and five presidential nominees. Instead of a lifetime term, the latter would serve for only seven years. The changes would tip the balance of power from the Senate toward the Chamber of Deputies. When it comes to constitutional matters, the Senate still will have veto powers, but the Deputies will get final say on routine bills. The Senate will have the opportunity to review everyday bills if a third of members want to. But they won’t get final approval. These proposed changes have gone through both chambers, but the two-thirds of the vote required was not received, so the referendum has been called.

So the referendum is not directly about the EU or the Euro system at all, and an Italian ‘no’ vote need not lead to Italy leaving the EU and/or Euroland, but there’s a lot at stake, including the constitutional functioning of the Italian government. Mr Renzi promises that if he wins, that the reforms will provide for less legislative gridlock and more governmental stability, and that he will resign the leadership if the referendum is defeated, with defeat implying more ongoing political chaos and economic stagnation. But there will also be an opening for alternative parties to step into power. The perceived threat is that the pro-European Union party in power under Mr Renzi’s wing will be outflanked by the populist Five Star Movement (M5S), which favours exiting the euro. If that were to happen, Euroland could fall apart. M5S doesn’t currently have any intention to lead a charge to leave the European Union, but its views are predominately Euro-sceptic, anti-establishment, and anti-globalist – and with Italy deep in debt, and its banks distressed, any pressure on Italy’s economy could destabilize the already unstable Euro system. In terms of risk magnitude, a ‘no’ vote could be more damaging, at least in the short term, than Brexit has been so far and it could be seen as another sign of the rising populism and nationalism around the world.

That said, Mr Renzi would retain his post at the helm of the centre-left Democratic Party, the biggest party in parliament, and therefore a ‘no’ vote could have little practical influence in the short term if Mr Renzi works closely with the new figurehead PM. Mr Renzi confirmed back in August that Italy’s general election would be held in 2018 as planned no matter the outcome of the referendum.

The next Italian general election could be interesting with M5S gaining popularity. Its leader is Beppe Grillo, a comedian-turned-political-activist with a blog promoting his populist views. But he is no joke. Increasingly, Italians, especially nationalists, like him and his party. It’s been widely publicized that the M5S could lead Italy to become the next country to leave the European Union. However, Mr Grillo has said that he hasn’t even contemplated doing so, and although he apparently wants a referendum on whether to drop the euro, Article 75 of Italy’s written constitution explicitly states that Italy cannot hold a referendum on anything related to international treaties.

Taking a couple of steps back, there may be a positive outcome from a ‘no’ vote in that the euro could weaken, directly helping Italy, and any sort of change might help revive Italy, even if it hurts at first. Equally, if the vote is ‘yes’, we should recognise that there’s a decent chance that Mr Renzi could then lead the country into a new era of stability and growth.

James Bevan is chief investment officer of CCLA, specialist fund manager for charities and the public sector. CCLA launched The Public Sector Deposit Fund in 2011 to meet the needs of local authorities and other public sector organisations. You can follow James on twitter @jamesbevan_ccla

*CCLA is a supporter of Room151

Get the Room151 Newsletter

Share

You may also like...

  • Terry Crossley: Is LGPS pooling sustainable? Terry Crossley: Is LGPS pooling sustainable? 28 Oct, 2018
  • The future of banking The future of banking 11 May, 2012
  • Graham Liddell: Living happily ever after (with a shared service) Graham Liddell: Living happily ever after (with a shared service) 7 Jun, 2016
  • Treasurer’s reflections – Q2: Yields & Risk Treasurer’s reflections – Q2: Yields & Risk 5 Jul, 2012

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 11 hours ago

    Budget 2021: A missed opportunity while bidding could prove a strain: The chancellor delivered the budget this week giving councils the opportunity to bid for funds but offering no resolution to long-term issues such as business rates retention, adult… dlvr.it/Rv2llw pic.twitter.com/8RwHboQAnL

    Room151 2 days ago

    ESG presents LGPS with investment innovation opportunities: Sponsored interview: Dawn Turner of Quinbrook talks about the opportunities in environmental, social and governance issues for LGPS. LGPS has the opportunity to innovate in its investment… dlvr.it/RtyK3Y pic.twitter.com/swAksOAXYQ

    Room151 2 days ago

    The opportunity in the UK renewables and grid support market as UK looks to ‘build back better’: Sponsored article: Mark Burrows and Rosalind Smith-Maxwell examine infrastructure opportunities emerging from efforts to meet the UK’s net zero target.… dlvr.it/RtyJyz pic.twitter.com/BQCYQZQpi2

    Room151 2 days ago

    McCloud consultation ends with “greater security” for LGPS members: The government’s consultation on LGPS, Catherine McFadyen argues, closes with a decision which avoids forcing members to make choices that could be “financially disadvantageous”. But… dlvr.it/RtxhL6

    Room151 3 days ago

    Could 2021 be less eventful for LGPS, please?: Barry McKay looks at McCloud, the 95k exit cap, employer risk and investments to see what to expect for LGPS in the coming year. On one hand, 2020 was in[...] dlvr.it/RtslFd pic.twitter.com/H4debuPmGG

    Room151 3 days ago

    Fixed income investing can help target both financial and sustainability targets: Sponsored article: Adam Whiteley offers a guide to the ESG benefits of investing in fixed income. Investing responsibly in fixed income can be crucial for local government… dlvr.it/Rtsl9h pic.twitter.com/khJL1xNfGh

    Room151 4 days ago

    Going beyond the standard metrics for climate change: Sponsored article: With climate change an investment imperative and an imminent reporting requirement, Ritesh Bamania argues UK pension schemes should look beyond today’s standard metrics. With… dlvr.it/RtnpLS pic.twitter.com/6ABaFHyS9I

    Room151 5 days ago

    LGPS webinar: Governance the key to TCFD implementation: LGPS funds have been warned that governance is it at the here of Whitehall plans to impose a new climate reporting regime on pension funds. In January the Department for[...] dlvr.it/RtjwNq pic.twitter.com/YMiMdmRyzU

    Room151 5 days ago

    LGPS webinar: Central bank management of bond purchasing could affect all asset classes: When the government debt caused by the pandemic is eventually tackled there may be a huge impact on assets of all classes, according to a leading investment expert… dlvr.it/RtjwJx pic.twitter.com/7v8K5vMYHo

    Room151 5 days ago

    #LGPS readers...what to do about #bonds? room151.co.uk/blogs/lgps-web… @BrunelPP 's new CIO, David Vickers tackles a problematic area #centralbanks #assetallocation #fixedincome pic.twitter.com/yUJr0azbKv

    Room151 5 days ago

    LGPS Challenges: Balancing Realpolitik and responsible investment: Elizabeth M. Carey warns of the perils of an ESG echo chamber as countries outside the West continue to invest in fossil fuels. Anyone working with the LGPS probably feels[...] dlvr.it/RtjMpq pic.twitter.com/MykIYxuYri

    Room151 1 week ago

    How can local government ‘build back better’?: Beverley Gower-Jones looks at the options for driving small business entrepreneurship in clean technologies. Innovation is essential for local authorities to save money and reduce emissions, it is the… dlvr.it/RtT3nS pic.twitter.com/bSMB6OG70t

    Room151 1 week ago

    Helen Randall: Spelthorne report places spotlight on ‘controls’: Fresh criticism of Spelthorne Council raises the question of what “good” controls look like when negotiating a property deal. Spelthorne Council’s continuing debacle over property… dlvr.it/RtSPhy pic.twitter.com/9uCOJgBcH6

    Room151 1 week ago

    Step-out strategies: Hitting the sweet spot between liquidity and ultra-short duration: Sponsored article: Jemma Clee describes how an ultra-short duration strategy can help local authorities enhance returns. Despite the expectation of a low, and… dlvr.it/RtSPZb pic.twitter.com/pdXPpv5lcN

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Autumn Statement: Infrastructure loan rate floated while social care funding crisis deepens
  • Next story First LGPS pools get green light

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.