Italy''s PM Renzi to resign after referendum rout

Rome, December 5

Italian Prime Minister Matteo Renzi is set to resign on Monday after suffering a crushing defeat in a referendum over constitutional reform, tipping the euro zone's third-largest economy into political turmoil.

His decision to quit after just two-and-a-half years in office deals a blow to the European Union, already reeling from multiple crises and struggling to overcome anti-establishment forces that have battered the Western world this year.

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Renzi's emotional, midnight resignation announcement sent the euro lower and jolted stock and bond markets on concerns that early elections could follow, possibly paving the way for an anti-euro party, the 5-Star Movement, to come to power.

But financial markets bounced back later in the morning as European officials played down the prospect of a broader euro zone crisis.

Even Italy's fragile bank sector, which is looking to raise around 20 billion euros ($21 billion) over coming months, staged a comeback on the Milan exchange after a shaky start.

"I take full responsibility for the defeat," Renzi said in a televised address to the nation, adding that he would hand in his formal resignation to President Sergio Mattarella on Monday.

"I will greet my successor with a smile and a hug, whoever it might be," he said, struggling to contain his emotions when he thanked his wife and children for their support.

"We are not robots," he said at one point.

SUCCESSOR

Sunday's referendum was over government plans to reduce the powers of the upper house Senate and regional authorities but was viewed by many people as a chance to register dissatisfaction with Renzi, who has struggled to revive economic growth, and mainstream politics.

"No" won an overwhelming 59.1 percent of the vote, according to the final count. About 33 million Italians, or two-thirds of eligible voters, cast ballots following months of bitter campaigning that pitted Renzi against all major opposition parties, including the anti-establishment 5-Star.

DEMOLITION MAN

Renzi, 41, took office in 2014 promising to shake up hidebound Italy and presenting himself as an anti-establishment "demolition man" determined to crash through a smothering bureaucracy and reshape creaking institutions.

Sunday's referendum, designed to speed up the legislative process, was to have been his crowning achievement.

However, his economic policies have made little impact, and the 5-Star Movement has claimed the anti-establishment banner, tapping into a populist mood that has seen Britons vote to leave the European Union and Americans elect Donald Trump president.

In a moment of relief for mainstream Europe, Austrian voters on Sunday rejected Norbert Hofer, vying to become the first freely elected far-right head of state in Europe since World War Two, choosing a Greens leader as president instead.

But elsewhere, the established order is in retreat. French President Francois Hollande said last week he would not seek re-election next year, and even German Chancellor Angela Merkel looks vulnerable as she seeks a fourth term in 2017. — Reuters