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IPFS News Link • European Union

Next EU Domino Falls as Italy Rejects Renzi by James Corbett

• The Corbett Report - James Corbett

The scene is becoming familiar, even if the actors change from stage to stage: A political establishment is overturned by a wave of populist anger. Markets panic and a sell-off looks imminent. And then…things stabilize. The government changes, but things carry on.

The latest version of this performance is taking place in Italy where Prime Minister Matteo Renzi has just been unseated after Italians overwhelmingly voted "No" on a constitutional referendum upon which Renzi had staked his political career. The proposed law would have made a series of changes to the composition of Italy's government, but it was not the technicalities of the proposed changes themselves that motivated over 65% of registered Italian voters to the public, and it was not some great interest in the composition and role of the Italian senate that led 59% of those voters to reject the new rules. Instead, this was seen as a referendum on Renzi and the political status quo in Italy itself.

renzilossRenzi's loss is the end of Renzi's brief (but not so brief by Italian standards) tenure as prime minister, but it is also a blow to the EUrocats in Brussels, who were hoping that the notoriously recalcitrant Italian public might be persuaded to engage in some mild political reform as an entree to more EU-friendly reforms in the future. The vote is a win for Beppe Grillo's Five Star Movement, a non-party party that has rode a wave of populist support to go from a joked about internet-only phenomenon at its founding in 2009 to a growing force in Italian politics today. This is also bad for the EU as both the Five Star Movement and the Lega Nord, an anti-immigration party that also helped spearhead the "No" vote, are very much anti-EU and talk about withdrawing Italy from the eurozone and re-issuing the lira.

Market response to the fall of Renzi's government and the rise of chaos should be familiar to those who watched the same responses play out post-Brexit and post-Trump. Markets panicked and sold off, with the euro hitting a 2-year low as the results poured in, with signs that the contagion would spread to stocks as markets opened Monday morning…

…But then, as with Brexit and Trump, the sky failed to fall and the doom-and-gloomers were left scratching their heads. Italy's FTSI MIB index tumbled 2.0 points on the news and bonds rose slightly, but the market is now exploding back upward. Even Italy's banking sector — still in a precarious situation, staged a comeback on the Milan exchange.

In reality, none of these numbers are important. Markets are responding to perceptions and fancies, not facts, and the fact is that there's no clear sign yet of what this means for Italy's political future, its banking crisis, or anything else.

beppe grilloWhat is clear is that yet another populist movement is knocking on the doors of power and preparing to overturn the status quo. The roots of the Italian people's anger with the EUrocrats can be traced back to the so-called "PIIGS" disgust at the treatment of Greece during the first bailout "negotiations" in 2010 and the silent coup that parachuted Goldman Banker and Bilderberger extraordinaire Mario Monti into the prime minister's office in 2011 as a sort of fait accompli by Brussels. The Italian people are increasingly fed up with the dictates of the EU and are looking to shake up a political, business and banking establishment that has thoroughly failed them and left the country teetering on a fiscal precipice.