Italian voters may overturn key legislation passed by Prime Minister Silvio Berlusconi’s government in referendums that end today, weakening his grip on power and increasing the chances of early elections.
Italians are voting in referendums to permanently ban nuclear power, stop municipalities from privatizing water services and block Berlusconi from using official commitments to avoid attending his corruption trials. Backers of the referendums have called on their supporters to vote not just to overturn the legislation, but to punish Berlusconi.
“They’ve made this referendum into a political vote for, or against Berlusconi,” said Chicco Testa, managing director of Rothschild for Italy and former chairman of Enel SpA, Italy’s biggest energy company. A former opponent of nuclear power, he now heads the Italian Nuclear Forum, which promotes atomic energy. “It’s no longer just about power and water,” he said.
For the votes to be binding, more than 50 percent of registered voters have to turn out. No referendum has reached that mark since 1995. Berlusconi’s backers are urging their supporters not to vote, to deny a quorum. The referendums will likely attract enough of a turnout to make them binding, Ansa news agency reported today, citing comments by Interior Minister Roberto Maroni. When polls closed at 10 p.m. yesterday, turnout had topped 41 percent, and traditionally the final day of voting attracts at least 10 percent of registered voters. Polls close today at 3 p.m.
“Following a decision the Italian people are taking today, we will have to say goodbye to the construction of nuclear plants,” Berlusconi told reporters today in Rome.
The vote will test public backing for the premier less than a month after his ruling bloc was defeated in local elections across the country. That setback has strained ties between Berlusconi and his key coalition ally, the Northern League, which has threatened to pull out of the government if it feels Berlusconi is a drain on its support.
Confidence in Berlusconi fell to 31 percent in an IPR Marketing poll published in April, the lowest since his last election in 2008.
The referendum may also have an impact on Italy’s public finances at a time when concern over the euro-region’s second-largest debt has pushed up Italy’s financing costs. The risk premium investors demand to hold the country’s 10-year bonds over German equivalents rose today to a six-month high of 184 basis points.
Opponents of the referendum to block the privatization of water services estimate that the government would have to eventually assume 60 billion euros in costs of upgrading the country’s water network if private investors aren’t brought in.
Voting against privatization “would be a step backward by 20 years,” said Antonio Massarutto, an economics professor at Udine University. “This is a country that still hasn’t completed depuration systems, where sewers aren’t connected to all homes, and where losses in the water transportation network, while a misleading indicator, demonstrate the increasing degree of degradation.”
In addition to serving as a rejection of key pieces of the prime minister’s platform, a “yes” vote could also speed up the four corruption trials involving Berlusconi, by preventing him from using state business as a reason to delay court appearances.
“If referendums reach a quorum, it’s almost certain that the ‘yes’ side will prevail, and therefore the so-called shield would be rejected and in that case Berlusconi would be in serious trouble,” said Federigo Argentieri, a professor at John Cabot University in Rome, in an interview with Francine Lacqua on Bloomberg Television’s “On the Move” program.
Backers of the water referendum cite examples, both in Italy and abroad, of municipalities that have sold water-management bodies to private companies that then raised rates and failed to boost investment or service quality.
Under the government plan, potential investors such as Rome-based utility Acea SpA would pay to upgrade Italy’s network and in exchange receive a guaranteed 7 percent return on their investment. A “yes” result from the referendum would jeopardize plans by Rome-based Acea, which is ready to increase investments in Italian waterworks, Andrea Bossola, who heads the company’s water division, said in an interview.
“We currently invest 450 million euros a year in water and are ready to double that number if they allow us to go ahead,” Bossola said.
Acea fell 0.9 percent to 7.32 euros at 1:40 p.m. in Milan. Enel Green Power SpA, the country’s biggest alternative energy company, gained 1.6 percent, to 1.95 euros, as investors bet the alternative energy company would gain from a permanent ban on nuclear power.
Opponents of the referendum say that privatization is needed to fix the country’s aging network. Italy’s pipelines lose about 38 percent of the water they carry, according to Federutility, an association of Italian water-service companies.
The Treasury will be stuck with “all the necessary investments” if the referendum passes, Federutility President Roberto Bazzano told daily Il Sole 24 Ore in an April 28 interview.
Italy, struggling with a debt burden of almost 120 percent of gross domestic product, second-highest in the euro-region, spends about 10 euros to 15 euros per capita annually on water-system investments, compared with about 85 euros annually in northern European countries, said Udine University’s Massarutto. Existing legislation aims to raise Italian investment to about 35 euros per person a year, he said.
-- With assistance from Lorenzo Totaro in Rome. Editors: Jerrold Colten, Dan Liefgreen