Italy’s Renzi to resign after referendum rout

Rome, December 5 

Italian Prime Minister Matteo Renzi is set to resign after suffering a crushing defeat in a referendum over constitutional reform, tipping the euro zone’s third-largest economy into political turmoil. “No” won an overwhelming 59.1% of the vote, according to the final count.

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.

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.

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

European Commissioner for Economic and Financial Affairs Pierre Moscovici dismissed talk of a euro zone crisis, and German Finance Minister Wolfgang Schaeuble urged calm. Both said Italy’s institutions are capable of handling a government change, which would be its 64th since 1946.

Italian Economy Minister Pier Carlo Padoan, who has pulled out of scheduled meetings with European finance ministers in Brussels this week, is viewed as a possible candidate to replace Renzi. Senate President Pietro Grasso and Transport Minister  Graziano Delrio have also been tipped as possible successors.

The government crisis could open the door to elections next year and to the possibility of the opposition 5-Star Movement gaining power in the heart of the single currency area. 5-Star, which campaigned hard for a ‘No’ vote, wants to hold a referendum instead on membership of the euro. 

In the meantime, Renzi would stay on as caretaker.

The new PM, who will need the backing of Renzi’s Democratic Party (PD) to take office, will have to draw up a new electoral law, with 5-Star urging a swift deal to open the way for elections in early 2017, a year ahead of schedule. — Reuters