Italian citizens vote on constitutional reform today in what some analysts see as the most significant political event of the year – even bigger than Brexit.

Prime Minister Matteo Renzi is campaigning for a “yes” to facilitate governing the nation in reforms that would essentially reduce the Senate’s power and only require approval of proposed laws by the lower house of parliament, contrary to the prevailing system which requires approval from both houses.  Were he to win, the senate would be reduced from 315 members to 100, with most taken from mayors and regional representatives.

Renzi argues that the suggested reforms would speed up the cumbersome, bureaucratic law-making processes in Italy, which has had 60 governments since 1948.

If the “yes” vote is rejected, Renzi has said he will resign.

The “no” vote, championed by Beppo Grillo, leader of the populist Five Star Movement (5SM), would block the reforms to streamline Italy’s public administration. His party believes that the proposed reforms would concentrate too much power in the prime minister’s hands.  Specifically, opposition to Renzi’s proposed reforms boils down to a new electoral system perceived to be attached to them, where people won’t be able to elect their own representatives in parliament. Thus, a “yes” vote would entail a parliament full of bureaucrats chosen from their parties that, once elected, would serve their party’s interests rather than those of the Italian people they supposedly represent.

Recent opinion polls, published prior to the two-week blackout phase of polling in Italy, indicated a seven-point lead in favor of the “no” camp with 53.5 percent to 46.5 percent.

Should the the majority of voters opt for “yes” in today’s referendum, Renzi would stay on as prime minister, the voting system would be reformed and an early election would likely take place in the second or third quarter of 2017.  If rejected, it is believed that Renzi would step down, the voting system would be modified to avoid a hung parliament, early elections would be called and it would affect Italian spreads as of the following day’s trading.

It is feared that a win for Renzi would stretch EU deficit laws even further in his pursuit of a more expansionist monetary policy. But a lot is riding on the referendum.  If Renzi loses, then up to eight of Italy’s troubled lenders are at risk of failure.  This, in turn, could trigger another banking crisis in Europe, and consequently, bring on political instability.

According to a Reuters report, Italy, the third-largest Eurozone economy, has been weakened by a deep recession that has left 356 billion euros ($377 billion) behind in major problem loans, and Italian banks currently need at least 20 billion euros in capital in the coming months to cover losses from fresh loan write-downs and planned bad debt disposals.

Some 50 million Italians have the right to vote in today’s referendum, and many voters are expected to voice their frustration in the voting booth today at the many years of economic stagnation Italy has endured.

Voting began this morning, Sunday at 07:00 (06:00 GMT) and ends at 23:00, with results expected early on Monday.

 The referendum text:

Do you approve the text of the Constitutional Law on ‘Provisions for exceeding the equal bicameralism, reducing the number of MPs, the containment of operating costs of the institutions, the suppression of the CNEL and the revision of Title V of Part II of the Constitution’ approved by Parliament and published in the Official Gazette n° 88 of 15 April 2016?

Sources: CNBC, BBC