Europe's biggest bank by assets, HSBC thinks that it is highly unlikely Prime Minister Matteo Renzi will resign his post, regardless of the outcome of next week's much-anticipated Italian referendum on constitutional reforms.
Italy will vote on a series of changes to the way the country's institutional frameworks are structured.
The vote — which will be held on December 4 — is now just over a week away, and represents the final big political risk event in a year that has seen both Brexit and the election of Donald Trump as US president.
As its stands, the "no" vote appears to have a sizeable lead, with polls showing the status quo holding a lead of roughly six points over Prime Minister Renzi's proposed reforms. A significant chunk of Italians — more than 20% — are still undecided, so the outcome is far from certain.
Speculation is rife that Renzi — who has spearheaded the drive for constitutional reforms and is the architect of the referendum — will resign if a "no" vote prevails, but Fabio Balboni, a European economist at HSBC disagrees. Balboni thinks that regardless of the result, Renzi will stay in Italy's top job. That is essentially because there is not really anyone to take the position from him.
Here is the key extract (emphasis ours):
"Our central case scenario is that, even after a 'no' vote, Mr Renzi stays as Prime Minister. First, he is likely to remain the leader of the biggest party in parliament. Mr Renzi himself said recently that whoever intends to take over as leader of the Democratic Party (PD) needs to call a congress, and win it, which won't happen overnight. And there does not seem to be anyone within the party ready to step in as PD leader. Second, the junior parties in the government coalition would have little interest in triggering early elections (nor would some of the opposition parties, particularly Silvio Berlusconi's Forza Italia)."
Balboni may not think Renzi will resign in the event of a "no" vote, but he does acknowledge one scenario where he could resign, but even then Renzi might end up staying as prime minister:
"If "no" wins by a wide margin, Mr Renzi might have little choice but to resign (after all, he had labelled this the 'crown jewel' of all his reforms). At that stage, the President might choose to give Mr Renzi another mandate (which he might or might not accept), or appoint a caretaker government."
