Italy will head to the polls this weekend, which could result in the 64th change in the county's government in 70 years. Prime Minister Matteo Renzi finds himself in a do or die situation. His proposed referendum to the Italian Constitution would both shrink the size and power of the Senate, translating into a more centralized power in Rome and perhaps a more stable government.
But, most recent polls have shown the "no" vote to be in the lead, and should that result come to fruition, Renzi has pledged to step down as prime minister.
"That is what the market is now expecting; a "no" vote to win. Prime Minister Renzi then resigns and then we are talking about political instability in the third largest nation in the Eurozone," CNBC's Julia Chatterley reported from Rome on Friday.
Not only could a "no" vote lead to political instability, but it would also have a significant impact on the Italian banking sector, notably the world's oldest bank Monte dei Paschi.
Now, while Italian Finance Minister Pier Carlo Padoan has said that a "no" vote would not result in economic catastrophe, he did say that it would put more pressure on the banks, and potentially cause "48 hours of market turbulence," Padoan told newspaper Avvenire Friday.
"That will mean more trouble trying to raise capital. And, we have got [Monte dei Paschi] trying to raise capital in the next couple of weeks," Chatterley noted.
Should the "yes" vote prevail this weekend, it could trigger a rally in the Italian banks, she added.