Italians are voting in a referendum on 4 December that is getting a lot of attention and causing concern across Europe. The vote could lead to the resignation of the prime minister, Matteo Renzi, and, some argue, even jeopardise the euro. So what exactly is it all about?

What will Italians be voting on?

A series of major changes to the Italian political system. These reforms, which affect a third of the Italian constitution, have already been approved by parliament but by a slim margin, thus requiring that they also be passed by referendum.

Under the current system, which was created under Italy’s 1948 constitution, there are two chambers of parliament with directly elected lawmakers, the Chamber of Deputies and the Senate. Both chambers have equal power – it’s known as “perfect bicameralism” – and both must agree on legislation before it is passed. This means, put simply, that it can take a very long time for things to get done. For example, a law to give children born out of wedlock the same rights as children of married couples took nearly 1,300 days to be approved.

The Italian Senate. Under the reforms, the number of senators would be reduced from 315 to 100. Photograph: Franco Origlia/Getty Images

Under the proposed reforms, the Senate would lose almost all its power – the number of senators would be reduced from 315 to 100, and the remaining senators would no longer be elected directly. Instead, the 100 would be made up of lawmakers selected by regional assemblies. Some mayors would also serve as senators.

If the yes campaign wins and the reform is passed, it would mean that most laws could be passed, including Italy’s budget, by the Chamber of Deputies without consultating the Senate, arguably making the whole process of passing laws a lot easier. The Senate would only have the power to weigh in on big issues such as other constitutional reforms and the ratification of EU treaties.



Sounds complicated.

It is, which is why the latest polls – before a blackout was imposed ahead of the vote – showed about a quarter of Italians were undecided. Renzi has said that these voters will determine the referendum.

I’ve heard this described as ‘Italy’s Brexit moment’? Is that right?

No. Italy is not voting to leave the eurozone or the EU. But there could still be far-reaching implications. First, if the no campaign wins, Renzi has said he will resign. He came into power promising to be a reformer, to drag Italy “out of the swamp” and build a strong centre-left majority, so his loss would be seen as a big blow to people who think his defeat is a rejection of his agenda.

It would also be seen, much like Brexit and the election of Donald Trump, as a victory of populist forces over an establishment party, although the reality – see below – is more complicated. If the no campaign won and Renzi resigned, a new caretaker government would probably take over and new elections could be held as soon as next year.

Donald Trump. If Italians reject the reforms, it would be seen as a victory of populist forces, much like the businessman’s election. Photograph: Evan Vucci/AP

One reason some observers think this vote is such a big deal is because it could open the door to the election of the Five Star Movement (M5S), a populist, anti-establishment party that has said in the past it wants to call a referendum on membership of the euro.

But even if the M5S took over Palazzo Chigi, the prime minister’s residence, it would not mean Italy abandoning the euro anytime soon. Doing that would require a constitutional amendment and another referendum. Euroscepticism is definitely on the rise in Italy, but there is no overwhelming political consensus against the single currency right now.

So what’s this referendum really about?

Good question. For some people, it really is about the constitution and whether these reforms are a good or bad idea.

But for most people, it’s a plebiscite on the prime minister: whether he has done a good job or not. Renzi enjoyed high approval ratings when he first came to power in 2014, but voters are generally frustrated with him for a bunch of reasons, including high unemployment and concerns about the migration crisis. Voting against the referendum has become synonymous with sticking two fingers up at Rome.

People march in support of the no campaign ahead of the referendum. Photograph: Fabio Frustaci/EPA

Who is for the proposed changes and why?

The yes camp is led by Renzi and most of his backers in the Democratic party, although there have been some high-level defections.

Big business interests, including the lobby group Confindustria, support the changes because they think it will make Italy more stable and help the government pass legislation that they argue is necessary but may not be popular, including tax and labour reforms. Investors generally support the proposals because they see the referendum as a test of whether Italy is capable of change.

Who is against them?

Everyone else, although their reasons vary. Some, but not all, constitutional experts believe the changes are essentially a power grab that will make Renzi, or whoever is sitting in Palazzo Chigi, much more powerful. They argue that the changes would obliterate the delicate balance of power that was designed in 1948 by people who had witnessed the rise of fascism.

Beppe Grillo, leader of the Five Star Movement, at a rally in support of the no campaign in Rome. Photograph: Marco Ravagli/Barcroft Images

All of Renzi’s political opponents on the left and the right are aligned against the constitutional reforms, in large part because they want to force his resignation. Of these, the most vocal critic is the M5S, led by Beppe Grillo, who is essentially arguing for the parliamentary structure to stay as it is.

Wait, the anti-establishment party is fighting for dozens of senators to keep their jobs in parliament?

Yes. One of the ironies of the referendum is that Renzi, who is seeking to change the current system and put more than 200 senators out of work, is seen as the “establishment”, while the populist and anti-establishment parties are defending the status quo.

So if it’s a no, it’s a really big win for M5S, right?

If the no campaign wins, it will definitely be a defeat for Renzi and a win for Grillo. But it’s more complicated than that. A no victory would – for reasons we won’t go into – force the current government to make a change to a totally separate electoral law. This, in turn, means that if M5S were to win the next election it would probably only get to take a proportionate number of seats in parliament. Under the present rules, the winner takes the majority.

In other words, a no victory could hamper the M5S from assuming power in the future, even though it would be a big win in the short term.

What will happen to the ‘Demolition Man’?

If Renzi loses the vote, he would most likely step down as prime minister. But he has indicated he would stay on as head of the Democratic party, which is still the largest party, so he would still have a lot of influence over what happens next.

Italy’s finance minister, Pier Carlo Padoan, could be selected to lead a caretaker government if Renzi resigned in the wake of a no vote. Photograph: Andreas Solaro/AFP/Getty Images

Most likely, in the words of Wolfango Piccoli, an analyst with Teneo Intelligence, the political crisis that would ensue after Renzi’s loss would be short-lived. A caretaker government, possibly led by the current finance minister, Pier Carlo Padoan, as prime minister, or the culture minister, Dario Franceschini, would be created with the help of Sergio Mattarella, the Italian president.

The next challenge would be the fight to win the next election, which could be held as soon as the spring or, at the latest, early 2018. Renzi is a tough politician and would fight to get back into Palazzo Chigi.

You seem to be predicting that Renzi is going to lose. Are you sure?

No. But almost all of the available polls show Renzi is behind and the country seems to be fed up with him. You never know, though: a whole host of factors, including a simmering scandal in Sicily about M5S, could diminish turnout for no and hand Renzi a victory. He could also get overwhelming support from up to 4 million Italian voters abroad, which could tip the scales in his favour in a close election. It just seems unlikely.

If he does lose and there is a new election, would M5S win?

There is a strong chance M5S could win based on current polls, but it is not a certainty. The party’s lack of experience could give Italians pause. One senator, Francesco Palermo, thinks that whoever wins – including M5S – would be far to the right of Renzi, putting much more pressure on Italy’s relationship with the EU, and probably leading to big changes in the country’s handling of the migration crisis.

Some of Italy’s biggest banks are in bad shape. How will the referendum affect the banking sector?

There is increasing alarm that the political upheaval created by a potential no victory would disrupt plans to recapitalise Italy’s most troubled banks, including Banca Monte dei Paschi of Siena. Shares in Italy’s beleaguered banking sector are down more than 20% since Brexit, in large part because investors are worried about the outcome.

Asked about the concerns this week, Padoan, the finance minister, acknowledged that uncertainty was bad for Italy’s economy but said each of the country’s troubled banks was being dealt with on an individual basis.