They may be right, but if so this will be the stupidest and most self-inflicted crisis yet in Europe’s sorry last few years.
Self-inflicted by Renzi and by investors and analysts.
The referendum concerns minutiae of the Italian political system. A 'no' vote would be a vote for the status quo. This is miles from the Brexit referendum — where a vote for radical change has created the biggest political earthquake in Europe for decades.
Renzi, in typical grandstanding style, foolishly promised to resign if he lost, turning what could have been a little local difficulty into something that might mean Italy needs a new prime minister — unless he changes his mind.
Markets have wilfully ignored the limited necessary implications of a 'no' vote and are behaving as if this is the next populist uprising.
In so doing they are ignoring a truly dangerous situation a little further north. Also on Sunday, Austria could elect as president Norbert Hofer, leader of the far right Freedom Party, founded by a former Nazi minister. The role is ceremonial by convention, but actually has wide powers the president can legally exercise.
Hofer’s stridently anti-Islamic and Eurosceptic views represent an assault on the European political consensus, and his election would make a new crack in Europe’s vital edifice of co-operation and liberal values.
A Hofer presidency periodically destabilising the Austrian government could be yet another disruptive influence on the market in 2017, and would add to the rightward march that could bring anti-European far righters such as Geert Wilders in the Netherlands and Marine Le Pen in France closer to power.
Suddenly, Italy’s referendum doesn’t sound so bad, does it?