The Potentially Disastrous Vote No One’s Talking About
In addition to the problems at Deutsche Bank, which is the real Creepy Clown in the global markets, Italy is getting ready to vote on changing the Italian constitution on December 4. The referendum would limit the powers of the Italian senate, which is viewed as a source of political gridlock. The vote is seen as a vote of confidence in the current pro-European Union government headed by Matteo Renzi.
If the referendum fails, it is likely to open the door for anti-EU parties to take over the government. Sources in Italy tell me that the polls are currently leaning toward defeating the ballot measure, something that markets are not expecting.
The Financial Times recently warned: “An Italian exit from the single currency would trigger the total collapse of the Eurozone within a very short period. It would probably lead to the most violent economic shock in history, dwarfing the Lehman Brothers bankruptcy in 2008 and the 1929 Wall Street crash.” Coming from a publication not prone to hyperbole, this warning should be taken seriously. Italy is home to the world’s third largest bond market (after the US and Japan) and the third largest economy in the European Union (after Germany and France).