When Matteo Renzi took over as Italy's prime minister in February 2014, he had two main goals. The first was to introduce a series of policies — most notably, a new labor law — to fight unemployment and generate economic growth. The second was to remodel Italy's political system to ensure more stable governments and to reduce the financial risk that political uncertainty posed. Though Renzi's economic reforms have been only moderately successful (unemployment is falling slowly, while growth has been timid), it is the political reforms that will define the future of his government and that could open a new phase of uncertainty for the rest of the eurozone.
Renzi's plan to build a more stable political system has two parts: reform the electoral law and change the Italian Constitution. The changes to the electoral law were approved in 2015, while the constitutional reforms will be put before Italian voters in a referendum before the end of the year. Under the new electoral system, a party that receives at least 40 percent of the vote in a general election is awarded 54 percent of the seats in the Chamber of Deputies, the lower house of Parliament. If no party reaches the 40 percent threshold, a runoff is held between the two parties with the highest vote totals. The party that wins the runoff is given enough seats to give it majority control of the lower chamber. The goal of the reform is to create strong governments that are not under constant threat of collapse. Renzi's proposed constitutional changes, meanwhile, are aimed at Parliament's upper house. If approved, the reforms would reduce the number of seats in the Senate and limit the body's participation in the legislative process. The Senate would no longer have the power to introduce a vote of no confidence against the government. Other reforms would shift some powers that currently belong to the regions to the central government. From Renzi's point of view, the next Italian government should control a strong majority in Parliament and wield more power than its predecessors.
Ironically, the reforms meant to create more stability in Italy have generated new uncertainty about its future. Should voters reject the constitutional reforms, Renzi would be significantly weakened and might even resign. But this does not necessarily mean that Italy would hold early elections. The Democratic Party could try to appoint a new prime minister without elections, a move that would require support from other parties. The largest parties in Parliament could also form a national unity government or even a technocratic administration, as happened in late 2011 when former EU commissioner Mario Monti was appointed.
