Italian referendum result could trigger Euro zone exit

Professor Fabrizio Carmignani forecasts a period of economic uncertainty in the wake of Italy's 'no' vote.
Professor Fabrizio Carmignani forecasts a period of economic uncertainty in the wake of Italy's 'no' vote.

The ‘no vote’ in last weekend’s referendum on constitutional reform in Italy could have economic implications far beyond the country’s borders, a Griffith Business School researcher says.

Italians wentto the polls on December 4.

An overall result in favour of constitutional reform would have created “a conducive institutional framework” to undertake structural reforms that many previous governments and parliaments have failed to approve, Professor Fabrizio Carmignani says.

However, the vote against reform triggered the resignation of Prime Minister Matteo Renzi and a new period of economic uncertainty.

“The uncertainty associated with the government crisis would foster concerns about the sustainability of the Italian debt,” Professor Carmignani says.

“Economic growth would thus continue to stagnate, eventually making debt unsustainable. Italy would then have to default, a condition that would be incompatible with permanence in the Euro zone.

“Italy would then exit the Euro and this would mark the end of the common currency.”

Read Professor Carmignani’s full analysis on The Conversation.