First there was Grexit, followed by Brexit, and now there's Quitaly. What is Quitaly? It's Italy's referendum that could decide if the struggling country will change its constitution.
Today's (Sunday) Quitaly vote for constitutional reform is deemed by many as the most significant European political event of 2016.
Behind today's vote is Italy's floundering economy. Over the last two decades, Italy has seen virtually no growth and sky-high unemployment. Plus, Italian goods have become less and less competitive in export markets.
Italy's Prime Minister Matteo Renzi has campaigned for a "yes" vote in today's voting, which he says will make governing easier in the country.
Reforms being voted on today would remove some of the Senate's power. That means proposed laws would only need approval from the lower house of parliament. Under the current system, both houses must approve laws.
Trending: Get the Best Investing Research Today to Grow Your Money
In a bold move, Renzi is putting his political fate on the line. He has said he would leave office if the "yes" vote loses.
Lobbying for "no" is the populist party Five Star Movement (5SM). The 5SM's goal is to block reforms that would streamline Italy's public administration and leave the current checks required in place.
Critics say a "no" victory means Italian citizens won't be able to choose their own representatives in parliament.
Opponents of a "yes" vote say a victory here would mean a parliament that is full of bureaucrats chosen from their parties who, once elected, will just aim to satisfy their leader instead of the people's needs.
The most recent Quitaly polls, which were published two weeks ago, revealed 53.5% to 46.5% of participants favor the "no" vote.
While the Quitaly vote is taking place in Italy, the ramifications are global. Here's what the Quitaly vote today means for investors stateside...
What Is Quitaly and How Does It Affect My Money?
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
In an analysis from Barclays out Monday, the firm said a "yes" win means Renzi remains prime minister, the voting system will be amended, and an election will take place in Q2 or Q3 of 2017.
The UK bank also expects resilient market reaction on Monday with little movement in Italian spreads.
Should the reforms be rejected via a "no" victory, Barclays anticipates that Renzi will leave office, the voting system will be modified to avoid a hung parliament, and early elections will be called in Q2 or Q3 of 2017. The bank also foresees Italian spreads performing poorly on Monday.
Some analysts believe a "no" win could spark another banking crisis in Europe. A "no" vote could cause financial instability and might even incite panic among investors, which would hurt Italy's banking sector.
Italy has the third-biggest Eurozone economy and has been plagued by a profound recession, racking up 356 billion euros in problem loans over the last five years. Bad debts now account for 18% of all Italian banks' outstanding loans.
Reuters claims that in the coming months, Italy's banks will need at least 20 billion euros to cover losses from new loan write-downs and bad debt disposals.
Volatility is likely in the days and months following Sunday's vote no matter the outcome. But Money Morning Chief Investing Strategist Keith Fitz-Gerald has created a full plan for investors to protect their money and profit following today's Quitaly vote.
Follow us on Twitter @moneymorning and like us on Facebook.
Related Articles:
- The Wall Street Journal: Italian Referendum to Determine Matteo Renzi's Fate
- Zero Hedge: Doug Casey on "Quitaly" and the Collapse of the EU
- Independent: Italy Referendum Explained: What Is It About and What Would a No Vote Mean for the UK?