Here’s Wolfgang M√ľnchau:

The largest and most important is the Five Star Movement, a party that defies the usual left-right classification. The second is Forza Italia, Silvio Berlusconi’s party, which has turned rabidly anti-euro after the former prime minister was forced out of office in 2011. And the third is the separatist Lega Nord. In democratic countries, it is common that opposition parties eventually come to power. Expect that to happen in Italy too.

The referendum matters as it could accelerate the path towards euro exit. If Mr Renzi loses, he has said he would resign, leading to political chaos. Investors might conclude the game is up. On December 5, Europe could wake up to an immediate threat of disintegration.

The first domino was Brexit and the second was Trump. Will Italy be the final domino, which triggers a eurozone financial crisis?

The euro was one of the biggest mistakes in modern European history. It represents a classic example of technocratic overreach—the Greeks would say hubris. The core problem with the euro is that it’s an experiment, which was set up in a fashion that is extremely difficult to undo if it fails. There is no possibility of a quick Italian devaluation; the more likely result is a massive government default, and a banking crisis.

Europe has stepped back from the brink a number of times in the past 6 years. But what makes the current situation so dangerous is that decisions are now being made by voters, and we’ve seen that voters are increasingly unwilling to accept the advice of the experts. (Some would say, “Hard to blame them”.)

My central expectation, however, remains not a collapse of the EU and the euro, but a departure of one or more countries, possibly Italy, but not France. In the light of recent events, my baseline scenario is now firmly on the optimistic scale of reasonable expectations.

The fact that this is the “optimistic” scenario might be the single most frightening thing I’ve read all year. Italian government bonds are the third largest asset class on planet Earth.

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