The referendum in Italy has the key to the future of the euro – The Commentator

After the triumph of Brexit and the electoral victory of Donald Trump, you would have to prepare for the return of the Eurozone crisis.
If Matteo Renzi, the Italian prime minister, lost his constitutional referendum in December 4, I would expect a sequence of events that would put in doubt the participation of Italy in the Eurozone.
The underlying causes of this possibility to be extremely alarming have nothing to do with the referendum itself. What is more important is the economic performance of Italy since it adopted the euro in 1999. The total productivity of the factors –that is the portion of the economic output not explained by labour and capital– it dropped in Italy close to 5% since then; while in Germany and Franc e rose about 10%.
The second cause has to do with the fact that the EU has failed to create an economic union and bank right after the Eurozone crisis of 2010-2012 and, instead, imposed an austerity. If one wants to know why Angela Merkel may not be the leader of the free world, look no more. The German chancellor could not even lead Europe when it mattered.
The combination of these two factors is the main cause of the growing rise of populism in Europe. Italy has three parties in the opposition, and all are in favor of abandoning the euro. The largest and most important is the Five Stars Movement, a party that defies the usual classification right-to-left. The second is Forza Italia, the party of Silvio Berlusconi, who became an anti-euro rabid after the former prime minister was forced to leave his post in 2011. And the third is the separatist Lega Nord. In democratic countries, it is common for the parties of the opposition eventually comes to power. In Italy it also happ ens.
The referendum is important because it could accelerate the progress towards the exit from the euro. Renzi said that if he loses, he would resign, which would lead to a political chaos. Investors may conclude that the game came to its end. On the 5th of December, Europe could be eating breakfast with an imminent threat of disintegration.
In France, the probability that Marine Le Pen wins the presidential election is no longer a remote risk. Of all the candidates who have appeared, she is the best prepared. There are some who could beat him, as Emmanuel Macron, the former finance minister’s reformist president Francoise Hollande, who announced his candidacy last week. But could not get to the last round of elections because it lacks the apparatus to a supporter. If Le Pen becomes president, he promised to call a plebiscite on the future of France in the EU. If that referendum leads to a Frexit, the EU ends the next morning. The same for the euro.
An output of F rance or Italy of the euro would lead to the largest default in history. Holders of foreign debt Italian or French nominated in euros, they would pay with the equivalent of the lira or swiss franc. Both devaluarían. As the banks did not have to reserve capital against their positions in sovereign bonds, the losses would force many entities to inland to declare bankruptcy. Germany then they would realise that the trade surplus bulk also has its disadvantages. There is a wealth of germans waiting to be defaulteada.
can I prevent that?. In theory yes, but it would require a series of decisions made at the time and in the correct sequence. For a start, Merkel would have to accept what they rejected in 2012: a route map towards a fiscal and political union complete. The EU would also need to strengthen the European Stability Mechanism, the rescue umbrella, which is not designed to handle countries the size of Italy or France.
what Is even remotely likely to happen that? Think of it this way: if one asks the chancellor if he wants Eurozone bond backed by the countries of the bloc, will answer no. But if you have to choose between eurobonds and exit of Italy from euro, his answer might well be different. The answer also depends on whether you ask before or after the German elections next fall.
however, my overriding expectation is still not to the collapse of the EU and of the euro, but the departure of one or more countries, possibly Italy, but not France.