Matteo Renzi campaigning for constitutional reform NurPhoto/Getty Images

Fleeing from Italy

In Italy’s December 4 referendum, voters will approve or reject the country’s most extensive constitutional reforms since the monarchy was abolished at the end of World War II. But the vote also amounts to a broader choice about continued eurozone membership – a decision made more urgent by accelerating capital flight.

CAMBRIDGE – Italy’s referendum on December 4 will give voters the opportunity to approve or reject what some have described as the country’s most extensive constitutional reforms since the abolition of the monarchy at the end of World War II. Yet it may be the fact that Italy’s three opposition parties all favor exiting the euro that explains why Prime Minster Matteo Renzi has promised to resign if voters reject the reforms.

Understandably, after the surprise victory in June of the “Leave” campaign in the United Kingdom’s Brexit referendum, and of Donald Trump in the United States’ presidential election, no one has much faith in polls in advance of the Italian vote. There is, however, a disquieting real-time poll of investors’ sentiment: capital flight from Italy has accelerated this year.

There is a recent precedent for this. In the summer of 2015, Greece’s short-lived default on its International Monetary Fund loan and the introduction of capital controls and deposit-withdrawal restrictions were at the center of the eurozone drama. Tensions between the Greek and German governments ran high, and speculation about whether Greece would remain in the eurozone escalated.

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