The Government has played down the implications of the Italian referendum result, which saw prime minister Matteo Renzi resign after a raft of constitutional reforms were decisively rejected by voters.
Minister for Foreign Affairs Charlie Flanagan firmly rejected any comparisons with the Brexit referendum in Britain, and stressed the domestic character of the vote.
“I don’t see any comparisons with Brexit,” he said. “This wasn’t about the EU, it wasn’t about the euro.”
Mr Flanagan pointed to the relatively muted response of the financial markets on Monday morning to the referendum result, which was not unexpected. He said the immediate consequences would be domestic, with international and European consequences taking longer to play out.
“To equate this with Brexit or Trump is misleading,” said another senior Government source.
The Italian result will be top of the agenda for EU foreign ministers when they meet in Brussels next Monday, and later in the week when heads of government meet for a regular European Council meeting.
EU finance ministers met in Brussels yesterday, with a separate meeting of euro zone finance ministers last night.
Weak banks
Speaking in Brussels, Minister for Finance Michael Noonan said there was no indication of any financial crisis arising from the Italian referendum, as some had feared.
"There's always concerns when you hear stories of banks being weak and some of the banks in Italy are weak. But the president of the European Central Bank Mario Draghi is Italian as well. I can't envisage a situation where the ECB under Mario Draghi would allow the Italian banks to get into difficulty," Mr Noonan said.
The situation in Italy will add another layer of concern for European leaders as they prepare for the beginning of formal Brexit negotiations with the British government, likely in the spring.
With elections now likely – though Italian president Sergio Mattarella is likely to call for an interim government in the meantime – European leaders will be looking past Mr Renzi to the potential next administration. The three main opposition groupings in Italy – the Five Star Movement, the Northern League and Silvio Berlusconi’s Forza Italia – are all anti-EU to a greater or lesser degree.
Initial concern about the fallout, however, will be economic and financial more than political, as markets eye the troubled Italian banking sector for signs of further weakness.
Ally of Ireland
The Irish Government will be sorry to see the departure of Mr Renzi. He has been on the same side of the argument as the Irish in debates on whether the European fiscal rules should be relaxed in order to enable public investment in infrastructure – a campaign that was bearing fruit. Finance ministers discussed the issue yesterday and Mr Noonan confirmed Ireland was seeking “more flexibility with the rules” to allow for more public investment.
The Italians had also been supportive of Ireland’s view that the eventual Brexit deal must include special provision for the North, a point acknowledged by foreign minister Paulo Gentiloni when he visited Dublin in the summer.
However, some Government sources say Mr Renzi is no longer the force he was at European level, as the pace of reforms slowed and his administration became bogged down in domestic issues. His record of delivery, says one senior official in Dublin, hardly matches the hopes invested in him as a new type of Italian leader when he came to office.
Fine Gael MEP Brian Hayes said the Italian referendum was not the “doomsday banking scenario” that some had feared
“This is not the big event that people said it would be,” Mr Hayes said. “The big events are the presidential election in France next year and then the German general election.”
