Everything you’ve ever wanted to know about the Italian referendum (but were too afraid to ask)
It might be hard to believe but not even six months after the UK's markets were rocked by the unexpected decision to depart from the EU, there's another European referendum around the corner with potential to shake things up all over again.
This Sunday, Italians will head to the polls to vote in their own referendum, and this is what it all means:
What's the Italian referendum all about?
Italy's referendum focuses on the country's constitution. A vote for yes is essentially a vote to streamline Italy's overly complex political landscape, but this would result in more power being placed in the hands of the Prime Minister.
What's the likely outcome?
The polls currently point towards a narrow win for the 'No' camp.
Could there be any immediate fallout?
Matteo Renzi's job for starters, as the Prime Minister, who proposed the referendum in the first place, has pledged to stand down from his post should 'No' triumph at the polls. Some commentators have noted this is a risky move, as voters could be influenced to cast their ballot based on whether they are impressed with the current rule of the country rather than whether they think their constitution needs cleaning up.
The Eurozone economy and markets could land on shaky ground too. In the short term, Reuters has reported the European Central Bank is already waiting in the wings to use its €80bn (£68.1bn) monthly programme to snap up Italian government bonds should the markets go haywire once the vote outcome is known.
What's the most drastic case for Italy's politics?
"Investors fear that a no vote in the referendum would mean the resignation of Prime Minister Renzi and political and economic turmoil which would lead to an Italian departure from the Eurozone," explained Paresh Davdra, chief executive and co-founder of RationalFXand Xendpay. "With the euro's standing already suffering as a result, and with opinion polls looking close, analysts will be watching events in Italy very closely over the coming days."
There are some worries that the eurosceptic populist opposition, the Five Star Movement (M5S), could easily swoop in and take advantage of Renzi bowing out, and that they will quickly call for an In or Out vote for the single currency.
What about currency movements? Should I be stocking up on holiday cash?
The euro's loss will likely be the pound's gain.
"November has proven to be a stable month for the pound, as political uncertainty from abroad looks set to push the pound further up," said Davdra. "The pound has benefited greatly from the US elections, and is currently doing well against the euro as the Italian Referendum approaches."
What does the vote mean for the banks?
Italy's banking system is already struggling, including carrying some €360bn in non-performing loans on their collective books, and the referendum is already causing more damage. Unicredit's share price, for example, has lost around four per cent of its value over the past week, although bank stocks did recover somewhat today.
Italian banking mainstay Monte dei Paschi di Siena is in a particularly precarious position, as the vote comes at the same time as the lender is trying to work its way through a rescue plan to boost its capital by €5bn. The bank was also the only institution to have its capital completely eroded away when stress tested by the European Banking Authority over the summer.
"It's a key moment for Italy's banks," said Neil Wilson, senior market analyst at ETX Capital. "Sunday's referendum on constitutional reform is Italy's Brexit moment and a No vote would send tremendous shockwaves through the markets and the banking system."
So, we're hoping for a yes for stability, then?
It's not quite that straightforward. "A 'Yes' vote would affect the powers of all areas of the legislature and, while some say it would rest too much power in the government, others say the new laws are poorly written and a Yes vote will kick off decades of legal challenge," said David Johnson, director at Halo Financial.