A ‘No’ vote against Government reforms could see Prime Minister Matteo Renzi resign – a move which is expected to plunge Italy’s banking and financial sector into chaos.
And investors have voiced their concern about the impact this could have on the country’s membership of the eurozone, warning the likelihood of it leaving has soared higher than during the bailouts.
Italy overtook Greece as the country most likely to leave the eurozone for the first time ever last month, as investors recorded a chance of 9.9 per cent in the poll by Sentix.
But investors have now seen the ranking soar, with the latest survey showing a whopping 19.3 per cent chance of Italy quitting the zone – the highest reading since the poll started in June 2012.
More than 1,000 institutional and retail investors were polled by Sentix between November 24 and 26 to find out their views on whether Italy could remain within the financial bloc.
And they found it is not just Italy that could be about to exit the crumbling bloc – with France and the Netherlands could also be looking for a way out.
The chance of any country leaving the eurozone stood at 24.1 percent, meaning this percentage of all surveyed investors expect the euro to break up within the next twelve months.
The report said: “The overall rise to a likelihood of 24.1% that a euro member country quits the union in the next 12 months, reinforces the notion that a surprisingly strong anti-euro sentiment has evolved during 2016.
“Moreover, Brexit increased overall risk levels.”
However this figure is significantly below a peak of over 70 per cent seen at the height of the eurozone debt crisis in 2012.
The survey comes just days before Italian’s will head to the polls to vote in a referendum on constitutional reform.
Renzi has constantly vowed to stand down as leader if his campaign fails, and it is now thought anti-EU party Five Star could replace the prime minister after the latest poll gave the campaign against the reforms a five per cent lead.
More immediately however, if Renzi fails it is likely to plunge Italy’s banking sector into chaos – in turn sending panic across the eurozone system.
As many as eight of Italian lenders could buckle amid a crisis of investor confidence in the country, it is feared.
Darius McDermott, managing director of FundCalibre, said: “If Renzi loses, European market reaction may well be stronger and longer than we have seen in the post-Brexit and post-Trump days as investors worry that this could be the beginning of the end for the EU.
“It could be a serious trigger point and bad for risk assets.
“European banks could take a hit and bond yields could widen in the periphery countries – the cost of Italian government debt would likely spike, which might ripple through to other southern countries such as Spain and Portugal.”