MILAN—Italy said it would hold a national referendum on Dec. 4 on key constitutional changes that aim to slim down the country's legislature, speed up lawmaking and attack the bureaucratic morass.

Prime Minister Matteo Renzi, who has dubbed the changes "the mother of all reforms," has pledged to resign in the case of a "no" vote.

The referendum could send the country into political upheaval given that Mr. Renzi's approval rating has fallen steadily also because his economic measures have failed to reignite growth, according to pollsters.

The overhaul would cut the number of senators by roughly two-thirds to 100, while allowing many bills to be approved by the lower house only. Both houses of parliament would only need to approve some types of legislation, such as electoral or constitutional changes.

The government says the changes would drastically improve the efficiency of Italy's legislative process, allowing for laws to be approved more quickly and reducing the cost of maintaining a full-fledged two-tier legislative system.

The proposal also seeks to reduce the power overlap between the central government and local and regional authorities, which is widely seen as a cause of Italy's cumbersome bureaucracy.

Italy's largest trade union, almost all the government's political opposition and some of Mr. Renzi's own Democratic Party members are backing a "no" vote, while the business community is in favor. Pollsters say the two sides are neck and neck, with about 40% of voters undecided.

Should a "no" vote win, snap elections aren't expected. Instead, an interim government could be formed to replace Mr. Renzi's coalition until next general elections, which are scheduled for 2018.

In the last Italian legislature, it took, on average, a year to approve a bill., compared with the 264-day average for national parliaments across the European Union. That is partly due to the fact that the two chambers of Italy's parliament have equal powers, where any change in a bill requires a new reading by both houses.

Meanwhile, Italy has the highest number of parliament members in Europe—945 compared with fewer than 700 in Germany and Spain.

Critics of the overhaul say the cost-cutting would be far less than the annual €500 million ($561 million) claimed by the government and would give too much power to the government, eliminating important checks and balances.

On Tuesday, the government is expected to cut its economic growth estimates for this year and 2017. Economists at HSBC and other banks say they expect it to set a 2016 target for gross domestic product growth of just 0.8%, down from April's estimate of 1.2%. The 2017 growth forecast will likely be trimmed to 1.2% from 1.4%.

Write to Manuela Mesco at manuela.mesco@wsj.com and Giovanni Legorano at giovanni.legorano@wsj.com

(END) Dow Jones Newswires

September 26, 2016 23:15 ET (03:15 GMT)