As in just about every other notable case, the way to get on top of the Italian debt problem is through economic growth. It would help if there were a return to positive rates of inflation, rather than the stuttering deflation that currently envelops the country. In many ways, though, these financial problems are less serious than the underlying economic weakness. Some readers may remember that in the 1950s, 1960s and 1970s Italy was a powerhouse of economic growth. At one point its GDP passed the UK’s, an event trumpeted by the Italians as “Il Sorpasso”.

But recently it has been a very different story. It is common to compare the performance of the world’s major economies since the onset of the financial crisis in the first quarter of 2008. All industrial countries suffered a loss of output in the first few years, but most then managed to recover. Since the beginning of 2008, the US and the UK are currently registering output up by about 12pc and 8pc respectively. Over the same period, Italy’s GDP is down by 8pc.

If this comparison seems pretty stark, then you should reflect on Italy’s performance since the euro was established in 1999. You may recall that this bold monetary construct was supposedly going to unleash a wave of prosperity across Europe, including Italy. Britain, which stood aside from the single currency, risked being left behind, mired in comparative poverty. Staying out of the euro was the Brexit of its time. The warnings of looming under-performance, accompanied by forebodings of the imminent departure of key Japanese and American firms, were its version of Project Fear.

To put it mildly, the outturn has been somewhat different. Since the beginning of 1999, the UK economy has grown by almost 40pc, against about 25pc in Germany and France. But Italy’s performance is in a different league. Over the last 17 years it has managed to grow by less than 6pc. In other words, since the formation of the euro, Italy’s economy has essentially stagnated. Along with this stagnation has come an employment disaster. Unemployment now stands at about 12pc of the workforce.

Nor is the long-term outlook very promising. The Italian birth rate is running at about 1.4 per woman. The United Nations projects that by 2035, Italy’s population will have fallen by about 2pc. Quite apart from what that would do directly to reduce the size of the Italian economy, this is not exactly an environment in which Italian businesses will be galvanised into investment.

It is pretty clear what would bring a revival of the Italian economy and ease many of its financial problems, if not solve its population crisis. Italy needs a much lower exchange rate. While it is in the euro, of course, it does not have a currency of its own to depreciate, and the exchange value of the euro is determined more by the performance of its Teutonic neighbours.

Not that a weaker currency would solve all problems. Italy needs fundamental reform, and not only to the powers and practices of parliament. But if it could enjoy a boost to competitiveness of 20 to 30pc through a lower exchange rate, this would lead to a surge in net exports and higher economic growth, with corresponding gains to employment. In such an environment, it might be easier to get through some of the many reforms that Italy needs.

You may think that a referendum on the powers of the Italian Senate does not promise to be anything like as exciting as the Brexit vote or the US Presidential election. But it is well worth keeping an eye out for the result of Sunday’s vote. Among other things, it may set Italy on the path to leaving the euro. Whatever the outcome on Sunday, though, I have come to believe that this is not a matter of if but when.

David Fuller's view

Italy’s economic decline since its considerably more prosperous 1950s, 1960s and 1970s, mentioned by Roger Bootle above, is shocking.  It may be tempting to blame this on the Italian political system, and not without some justification.  However, the decline also asks questions? 

Why have most EU nations declined during what has been largely a peacetime era in Europe?  Also, why has this decline become precipitous since 1999, when individual currencies were abandoned in favour of the Euro?

I blame this uniquely European problem during our modern era, on the initially subtle and gradual undermining of sovereign rights and responsibilities within the European community.  This problem accelerated with the introduction of the Euro and governance on a largely German and French axis. 

The ultimate folly, widely predicted by experienced international economists, was the introduction of the single currency without political union.  The reason for this was the total lack of enthusiasm for political union among the electorates in countries which had fought with each other over centuries, to prevent their own sovereign rights from being subsumed.

Arguably, national electorates are even less interested in political union in future – what Jean-Claude Junker refers to as “more Europe”, than at any time since the EU was formed.  For this reason the failing EU is heading for separation, and probably more quickly than most Europeans suspect. 

How would Italy’s stock market perform if the country had a devaluation of 20 to 30 percent, as Roger Bootle mentions above, preferably not within the Euro but with a reintroduced Italian Lira? I think the Italian SPMIB Index would soar, presumably from an even lower level than we see today.

(See also: What Will Italy’s Referendum Mean for the Euro, from Bloomberg) 

Here is a PDF of Roger Bootle's article.