"Meanwhile In Europe..." - The Big Day Arrives

Tyler Durden's picture

Less than a month after the "shocking" election of Donald Trump as US president, the world prepares for another day of political shockwaves, this time out of Europe, when on Sunday all eyes will be on Italy and, to a slightly lesser extent, Austria.

Or, as Bank of America puts it "Meanwhile in Europe..."

As we have previewed on various occasions (most recently in Friday's extensive "Everything You Need To Know About The Italian Referendum & Should Be Afraid To Ask"), in a few short hours, Italy will vote on a constitutional reform referendum. While we urge readers to skim the in depth "walk thru", here is a simplified version of what happens after the likely "No" vote tomorrow.

The main concern in the markets - which has manifested itself in both the European currency, its vol structure, as well as Italian bond yields - is that a strong “No” vote will cause Prime Minister Renzi to resign, leading to political instability in Italy. Furthermore, a "No" vote is expected to kill a long-running attempt to rescue Italy's third largest and oldest bank, Monte dei Paschi, which has been desperate for a private sector bailout ever since it failed this summer's ECB stress test to avoid broader banking sector contagion; a failure of Monte Paschi will likely spark a fresh eurozone banking crisis, and prompt the ECB to get involved again (as it warned it would do), in a redux of what happened after the Brexit vote.

Also on Sunday, there is also a presidential election in Austria. A victory by the right-wing candidate, Norbert Hofer, would raise concerns about EU fragmentation because his party has advocated a referendum on EU membership. His victory would also raise concerns about a similar outcome in the French elections in May, and many other upcoming European elections as shown in the calendar at the bottom of this page:

However, while the Austrian vote will again be down to the wire - and since this time there won't be any Brussels-endorsed "widespread voting fraud", Norbert Hofer is assured to win - the key event will be the Italian vote. Here is what to expect in terms of timing:

  • Provisional turnout results from 7pm GMT (2pm ET)
  • Exit polls then expected around 10pm GMT on Sunday night (5pm ET)
  • First projections by Italian pollsters based on counted votes at around 10.45pm GMT (5:45pm ET)
  • Final result will come in around 2am on Monday (9:00pm ET)

In the highly improbably event the "Yes" vote wins, Deutsche Bank analysts write that a rebound in the Italian equity market should be largely restricted to financial stocks. Although the FTSE MIB is trading at a 15% discount relative to its 10-year average vs. Europe, valuations look substantially less attractive once banks are excluded from the index. The relative P/E of the FTSE MIB ex banks is trading in line with its long-term average vs. Europe ex banks. Several Italian sectors are even trading at a premium vs. their European peers, showing no signs yet of a spillover of banking sector risks.

That may change in just a few hours.

The biggest question from tomorrow's vote, is what happens to Italian PM Renzi should he lose the vote, and as France 24 reports, if voters reject Renzi's plan to streamline parliament, the centre-left leader has said he will step down.

The self-styled outsider in a hurry to shake up Italy finds himself on the inside, a target for those who say he has not been quick enough in fixing long-standing problems. For those unfamiliar, here is a brief snapshot of Renzi's approach, and political options:

After rapid rise, Italy's Renzi braced for fall


Renzi was just 39 when he came to power via an internal party coup in February 2014. With his penchant for retro sunglasses, open-necked shirts and jeans, the former mayor of Florence was hailed at the time as a premier for the smartphone generation. But the breath of fresh air is now in danger of being blown away by rival young Turks from populist and far right opposition parties trying to force him out.


After 1,000 days in office, Renzi, now 41, boasted last month of having steered the economy out of recession, got Italians spending again and improved public finances. He has also had significant political victories: a controversial Jobs Act passed, election rules rewritten and his candidate, Sergio Mattarella, installed as president.


As his Twitter follower numbers rose, so too did his international profile. Renzi was feted for his reform efforts by US President Barack Obama and German Chancellor Angela Merkel. "Matteo has the right approach and it is beginning to show results," Obama said just before treating Renzi and his school teacher wife Agnese to the last official White House dinner of his administration in October.

But many Italian voters do not share Obama's optimism. As the recovery has struggled to gain traction -- leaving unemployment stubbornly high, particularly among young people -- Renzi's ratings have slipped.


The Jobs Act, which eased hiring and firing, made him business friends but alienated trade unions and the left. A bullish style that was once seen as energetic has come to be viewed by some as high-handed, including by some grandees of his own party. Former Prime Minister Massimo d'Alema, a fervent critic of Renzi's constitutional proposals, described his successor to the New York Times as a Twitter-obsessed "oaf". The decline in Renzi's popularity is relative however. Polls suggest the Democratic Party, under his leadership, would top an election held tomorrow, albeit only just.


Born on January 11, 1975 in Florence, Renzi studied law and took his first steps in politics as a teenage campaign volunteer for future prime minister and European Commission chief Romano Prodi. By 26 he was a full-time organiser for La Margherita (The Daisy), a short-lived centre-left party.


He was only 29 when he became the leader of the province of Florence in 2004, establishing a power base that enabled him to go on to become mayor in 2009 and prime minister five years later. But for a brief spell in his early 20s working for the family advertising business, politics is all he has done and friends say he would be loath to give it up, despite his protestations to the contrary.

Even if has to make way as premier, he is not expected to give up the party leadership.

In short, Renzi is still very young, and a failure tomorrow followed by a resignation, means merely a detour for the career politican, not an end. The bigger question, however, is whether Italy is stable enough and its banks solid enough to survive a politidal vacuum wthout a "technocratic" government ready to step in and fill the void. The answer may be revealed as soon as Sunday night when the Euro opens for trading.

* * *

There is more to come.

As Bank of America notes, the common thread in all of these stories is that politics is driving economic outcomes. This dynamic will not change anytime soon, and BofA notes that it is "particularly concerned about the  drift toward protectionism." The bank notes that the number of trade restrictions globally has already picked up. Data from Global Trade Alert, a group of academic economists, shows an increase in the number of protectionist measures starting in 2012 and accelerating sharply in 2015. These include not just tariffs and quotas, but a range of policies that give  preference to domestic over foreign products.

An Italian "No" vote simply accelerate the global backlash against globalization, and lead to even more trade protectionist measures. But what is the most likely outcome, is that when the "No" vote wins (despite the endorsement of The Economist, which has gotten the outcome of every major political event this year wrong), it will only push the case for the anti-establishment vote in more European countries, until eventually Europe's populist forces stretch the European experiment so thin, that the Eurozone itself - an experiment which from day one catered to corporate interests and an established political oligarchy - will collapse under the weight of its own discontents.

For now, we await the surge in volatility that will emerge tomorrow afternoon, only to mysteriously disappear as every central bank around the globe engages in another BTFD orgy, sending risk assets higher even as the rapidly "isolating" world teeters on the verge of globalized collapse.

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hotrod's picture

Gold really should be rising due to all of this world wide political destabilization.  I guess that it is in many currencies.

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) hotrod Dec 3, 2016 10:40 PM

Everything that should logically be massively negative for the "markets" pushes it way higher instead. The destruction of the EU should give us DOW 50000.

Croesus's picture

@ The Artist Formerly Known As Fonestar:

Arguably, this is your best post, ever, and it didn't even mention Satoshi, or BTC, or any of it.

Well done!

zorba THE GREEK's picture

Italy, this is your defining moment, spit in your oppressors eye and throw off your chains. If you don't, you will sell your children and grandchildren into slavery for centuries to come.

tarabel's picture



Hey, they're Italians. Selling children and grandchildren into slavery is a family tradition dating back to the days of ancient Rome.

wee-weed up's picture



"Less than a month after the "shocking" election of Donald Trump as US president"

Correction... "shocking" only to the Leftists with their heads in the sand. The rest of us expected it.

Nemontel's picture

Yeah, LOL, everyone on the right saw it coming, leftoids live in a parallel world.


Ragnor789's picture

It's time for this expirament to fall apart. Let it burn. 

CuttingEdge's picture

My crystal ball sees a Draghi Ctrl-P moment tomorrow morning.

SubjectivObject's picture

Creative Poll tracking



For instance, the home page of YouTrend, a leading online publication devoted to trends and polling, prominently features a so-called conclave vote at the Vatican, seemingly scheduled for Dec. 4—the same day as the referendum. The church is apparently very divided on this “divine judgement”, according to the site, which displays a choice between saints: San Simplicio (or “SI”) and San Norberto (or “NO”). San Norberto is in the lead, with 52 to 54 cardinals apparently voting in that direction. (Spoiler: there is no vote happening at the Vatican this Sunday.)

zorba THE GREEK's picture

Tarabel......that's funny and sad and probably true..
Hey... Is that a picture of you in your avatar? If it is,
Zorba would really like to meat you...sorry I meant
meet you. Bio. Zorba is 6'1", was very handsome in
the 1960s and 1970s and appreciates an outgoing, confident
woman. If you are interested in pursuing a possible hookup,
please email me at - zorbaloves viagra@gmail.com

zorba THE GREEK's picture

"Come on, that's funny, I don't care who you are" - Larry The Cable Guy

Nukerella's picture

Meh...that's what grandchildren are for. Just sayin'...

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) Croesus Dec 3, 2016 11:03 PM

Thank-you Croseus but I am passionate about liberty and freedom in general and not just Bitcoin.

algol_dog's picture

I stayed on the sidelines for this weekend figuring the last 2 episodes of the end of the world were head-fakes after dramatic sell downs. Judging by Fridays complacency, I'm figuring this time it will be a gigantic sell off for real. That's how they do it you know ....

DEMIZEN's picture

the truth is, italy is fucked one or another way.

chubbar's picture

I'd like to see a list of the names of the dudes in Brussels that are the movers and shakers behind all this EU immigration/austerity bullshit they implemented in the EU? I want to see names and faces published so these fuckers can be identified and taken care of when TSHTF. They need to be hung from their heels in the public square.

Cazzi amari's picture

here is a small list to get you started:

Juncker, Cecile Kyenge, Merkel, Laura Boldrini, G. Soros, Matteo Renzi, Hollande, Sarkozy, ROTshild, Obama, Qatar, Saudi Arabia, B. Lerner Specter of Zion and many more.

c2nnib2l's picture

yeaah Whole Europe is. With slim chance for UK if they follow the Brexit voice and start trade negotiations with other countries. Luckly enough UK still got own currency and Pounds is strong enough to survive this turmoil ( I think ) :D

wildbad's picture



Grandad Grumps's picture

One way or another, the human race will never trust the corrupt parasites ever again. They are through.

all-priced-in's picture

Some people are parasites before they are elected - 


But all of them end up parasites after being elected.


You can't swim in a sewer full of shit everyday and not start to smell like shit yourself.


Plus - Must be something about getting a taste of power and knowledge that there is limited accountability.

Cheka_Mate's picture

The Economist- a totally impartial source of journalism with a finger on the pulse of the average European...

Owned and run by the Red Shield Family 

Uzda Farce's picture
Uzda Farce (not verified) Cheka_Mate Dec 4, 2016 8:59 AM

In 1988, while Evelyn de Rothschild was chairman, The Economist predicted a new world currency by 2018 after the others go up in flames. Stay tuned.


tarabel's picture



A couple of thoughts.

1) I never knew that John Edwards had become Prime Minister of Italy.

2) If the referendum fails, Italy leaves the Euro and Monte di Pile-of-shit is saved because it no longer needs to meet the Eurozone stress test. Much more economical than actually, you know, fixing stuff.


Bam_Man's picture

That is not John Edwards.

Just one of his many "love-children".

PTR's picture

Italy changes governments like hollywood actors changes spouses.


PS- #PizzaGate is global

wisehiney's picture

I would just like to know who named a whole damn continent after the sound of regurgitation.


dogismycopilot's picture

I bet the Italians take it up the poop chute.

damicol's picture

Italy, went there once.
Long time ago, liked it a lot

Saw the leaning tower of Pizzagate
Ate a Pizzagate at a restaurant in Florence

Drank too much in Rome, desperate for a pizza but luckily a public pizzagate nearby.

yngso's picture

The leaning tower that the world knows is in Pisa. Pizzagate doesn't sound very Italian. Memory loss from too much vino?

GoldenDonuts's picture

And finally the world learns that boundaries matter.  That reality matters.  That there is physical limits and that there are no free lunches   I am so sick of being  labelled a pessimistic old man when really I am an unbrainwashed realist.

The end is nigh and I am nervous.  But when reality finally resurfaces and the values of integrity, hard work, honesty become important again it will be a better world.  Oh and hanging all of the mother fuckers who run the show now will help.

webmatex's picture


Folks in Europe are not voting for tax cuts or free stuff, there voting to throw the corrupt, criminal and inhuman from the system regardless of the consequences.

Celent said "When youve got nothing left to lose - people lose it"!

We all lost it a long time ago over here and have nothing left but senseless voter rage, vengeance and retribution.

Tear it down. Burn baby burn. Replenish those roots.

overmedicatedundersexed's picture

Jill Stein is demanding a recount before the vote in Italy. cause soros says so

brushhog's picture

I wouldnt hold my breath for the Italians. There's a big difference in mindset and culture between Americans/British and southern Europeans. The brits and Americans have an independent streak, and individualist..."can-do" attitude that you dont find often in Europe, particularly in the south. I hope I'm surprised, but Im not expecting much.

chiquita's picture

I don't know about that.  Traveled to Italy a number of times in the late 90s/early 2000s--primarily Rome and south.  I saw major discontent among the Southern Italians with the country's entry into the European Union.  They were unhappy with the change in currency--prices went up and salaries did not.  There were restrictions on what they could import that previously did not exist. There was normalization, but I don't think things ever really improved greatly for the "little guy".   I think you may see that they are more nationalistic than you think.  Mezzo giorno are very proud people who love Italy--maybe not so much the United States of Europe.

Jungle Jim's picture

Gold. What about gold? I just want to know about gold.

Chuck DeBongo's picture

I'm really hoping that Italy reject the reforms and that Austria vote for Hofer. This sounds counter-intuitive coming from a leftie like me (A leftie? At ZH?! Call the fumigators!!!!), but things are simply not sustainable the way they are and I'm willing to clutch at anything which will bring it all down. I'd be saying if the situation was reversed and the only way to bring things down would be to vote in an extreme leftie.


Left or right, doesn't matter to me. I want someone (or something) which will bring this rotten structure down and build something better. Something that will listen to me and not a rich businessperson or foreigners who have nothing to do with my country (e.g. "You voted for me? First act is to bring in loads of fake refugees and immigrants and use tax payer money to do it!" "Well, I was thinking of spending that money on hospitals and infrastructure for me and my fellow citizens?" "Nope! This is more important!"). I realise I'm atypical of the regular ZH reader, but we do have some common ground...

0phita's picture

You are not entirely alone here, Chuck DeBongo. I confess I'm ideologically a social democrat, and yet, ZH is my first go-to read in the morning--go figure. I no longer believe in political parties--the system is so captured by the 'dark forces/NWO/elite/cabal' or whatever we call it; there is really no longer left or right, there's only truth or propaganda. ZH generally cuts through the propaganda, and presents relatively unvarnished news. And because I read sites like this, I was fairly certain the Donald would beat Clinton, IF the voting system wasn't completely manipulated. I woke up with such a sense of relief on the morning after he was elected--even though I don't expect DT to be 'our' saviour, I am very hopeful he has lead us back from the precipice of WWIII. I'm enjoying the show he's providing, and I love how he just fires off little flashes of truth, such as 'Erodogan looks more like he's supporting ISIS because of the oil', or 'what's wrong with taking a congratulatory phone call from the president of a country that we sell weapons to for billion$'.  I'm comfortable here on this site, even though many of ZHers think socialists are just a bunch of 'retarded liberals' and 'snowflakes'--I agree with Chuck, we have a lot more common ground than one might think. I believe that we all want to be free of enslavement from our owners, we want the wealth returned to the producers and workers who have earned it (Trillions have been stolen and we should get that back!), and we want our constitutional and basic human rights. From a socialist perspective, I want those things for everybody, and not just for myself. Now, if ZH and the other alternative media just can survive this looming onslaught from the establishment against alleged 'useful idiots of Russian propaganda'. I hope we fight back relentlessly against those dark forces!

Witness's picture

Can I start spraying the champaign already?!

yngso's picture

It was on Renzi's watch that a pensioner lost all his savings to a stupid bail-in and committed suicide. Bail-ins are a bad idea, but you have to start with a % of everything over EUR 100 000 like they did in Cuprus if you're going to do it. Only hours left now...

numapepi's picture

Imagine the absurdity of a bail in.

Let's reverse the situation to give some perspective...

Say a mortgage holder looses his or her job due to drug addiction and is in bankruptcy for it. Would it be logical then to have the bank write off the loan on his or her house?

Now compound that imbecility with the fact that most of the "money" lent to the borrower is made up on the spot with an account entry, while the money the pensioner deposited into their account, was money he or she worked for, (traded life for).

Talk about pernicious incentives!

Trucker Glock's picture

No worries.  Nothing printing some "money" can't fix.

numapepi's picture

As seems always to be the case, the progressives have taken a good and piled evil upon it until it is revolting to every sane person.

Global trade is a good thing... global government is an evil right out of Revelation.

Eric_PhD's picture

Bravo for using a longitudinal view (16 yrs) and a decision matrix.  That is what made me sign up here; and, I never ever sign up anywhere.  Gonna watch your site closely.  Thx, Eric, Ph.D.

IridiumRebel's picture

Careful good doctor, we are considered fake news. May need stalwarts ABC and MSNBC to make sure the reporting is trustworthy.