EU project is now at risk and so is the euro - BBH

Analysts at Brown Brothers Harriman explained that although there are a number of potential flashpoints in Europe, the two that are capturing investors' imagination is the Italian referendum in early December and the French Presidential election next Spring.   

Key Quotes:

"Renzi had backed away from his early promisethreat to resign if his constitutional referendum (on reducing the size and function of the Senate) failed.  However, over the weekend, he hinted again that he might resign.  To be sure, polls suggest the referendum, which is opposed by all the opposition parties and some members of Renzi's coalition, will likely fail to garner majority support.  

There are many challenges if Renzi resigns.  The political reform efforts have begun, but without the changes to the Senate, the earlier changes will have to be revisited.     Renzi is the third unelected Prime Minister.  His replacement would be the fourth.    Elections are not slated until 2018, and the second largest party in Italy is the 5-Star Movement, which wants to have a referendum on continued EMU membership.

In France, the center-right Republican Party will hold the first round of its first primary this coming weekend.  A second round run-off will be held the following weekend.    It is important because the winner is most likely to face Le Pen in the second round of the French Presidential election in the Spring.  Hollande's Socialist Party is suffering in the polls.  His support is in single digits."

EUR/USD: headed back to 1985 lows and below parity? - BBH