Pound Sterling Forecast
The Italian people will vote on Sunday on the Italian constitution. The vote could cause major changes to the Italian political system. Reforms that affect a third of the Italian constitution have already been approved, but due to the vote by parliament having been so close, a referendum must take place.
The current system is farcical. Two chambers of parliament with elected law makers. The chamber of deputies and the senate. Both have equal power and both must agree in order for a legalisation to be passed. This can cause serious problems when the two parties are at logger heads. Legalisation that should go through smoothly can be troublesome and lengthy.
The proposed reforms will essentially give chamber of deputies all the power, legalisation would not have to be passed by the senate, potentially legalisation would go through in a much quicker fashion.
Matteo Renzi, the Italian Prime Minister has threatened to resign if the new reforms do not take place. With Italy’s financial problems such as Italian Bank’s bad loans in excess of €360bn a Prime Minister’s resignation could cause serious political uncertainty. The currency markets do not react well to such uncertainty and we could see the Euro fall in value significantly.
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