Italian citizens will decide on a constitutional reform in a referendum that will take place on December 4. Financial expert Ernst Wolff fears that a "no-vote" would lead to serious troubles for Italian banks and the European financial system in general.

On the one hand, the expert argues that the victory of the "yes-votes" would mean the demolition of democracy as such because the government will be given many possibilities to adopt laws that are not accepted by the population.

The reform would lead to a "strengthening of the authoritarian state," Wolff said in an interview with Sputnik Germany.

At the same time if Italians do not vote for the changes, it will bring the Italian and European banks great difficulties, Wolff argued.

"Italian banks will be in trouble. Although difficulties exist anyway. The problems of the Italian banks are actually unresolvable. They sit on rotten loans that officially amount to 360 to 400 billion euros. Unofficially, they reach 600 to 800 billion euros. These are huge problems and these problems are supposed to be solved via referendum," the expert said.

"The very basic problem in Italy is the same basic problem that we have everywhere. The financial system has actually been dead since 2008 and is artificially kept alive, but the measures to maintain this financial system are no longer effective," he added.

According to the expert, The EU won't be able to leave the Italian banks in the lurch. Thus, it will have to invest a lot of money to keep the Italian financial system afloat. In this case, Germany, being the largest economy in the EU, will have to bear the main costs.

"The Italian banks are very much networked with other banks, including French and German banks. Especially in case of Germany we should not forget that the fourth or fifth largest German bank, the Hypovereinsbank, is a (…) subsidiary of Unicredit. This is the largest Italian bank. So if the Italian banking system goes down, this would create a domino effect which would also affect German banks and lead to the disintegration of the entire banking system within the EU and, thus to the disintegration of the American system and the global system," the expert concluded.

Italy is holding a referendum on Prime Minister Matteo Renzi's proposed constitutional reform on December 4, which is seen as possibly paving way to the nation to leave the EU. In response, the European Central Bank (ECB) is preparing to address the possible consequences with its monetary stimulus measures.

Italian PM Matteo Renzi who initiated the reform claimed that the reform would help to resolve bureaucracy problem and that Italy would become stronger and more stable if the citizens vote for the changes. The reform, in particular, is supposed to reduce the number of the parliament members and bring an end to the bicameral parliamentary system.