Rome: Italy sank into political limbo after Prime Minister Matteo Renzi announced his resignation on the back of a crushing defeat over his constitutional referendum, triggering renewed financial turbulence for Europe.
The premier was due to hand in his resignation to President Sergio Mattarella on Monday afternoon, after Renzi’s proposal to rein in the power of the senate was rejected in a referendum by almost 60 per cent to 40 per cent, with almost all votes counted. Renzi signalled that he won’t stay on to help stabilise a caretaker administration.
The euro fell to a 20-month low, while stock index futures and Italian bonds slumped as the prospect of mounting political risk buffeted financial markets.
Much of the focus is on Banca Monte dei Paschi di Siena SpA, which is in the middle of a €5 billion (Dh20.6 billion) capital raising. Its stock has fallen 83 per cent this year and a third of its loan book has soured.
Italy’s Finance Minister Pier Carlo Padoan cancelled a trip he was due to make to Brussels on Monday for a meeting of Eurozone colleagues, his spokesman said in a text message. Padoan, a potential successor to Renzi, will attend a cabinet meeting before Renzi hands in his resignation.
“In Italian politics, no one ever wins,” Renzi told supporters at a news conference shortly after midnight, his voice breaking and a tear on his cheek as he thanked his wife for her support. “I did everything I thought possible in this phase, but we were not convincing.”
The 41-year-old premier became the second European leader this year to be toppled by an anti-establishment revolt that is propelling Donald Trump into the White House and Britain out of the European Union. The result leaves Mattarella seeking a new government chief who can provide a firebreak against the insurgents; polls suggest an early election would see the anti-euro Five Star Movement swept into power.
A survey by EMG released Sunday showed Five Star winning a second-round ballot by 53 per cent to 47 per cent against Renzi’s Democratic Party and by 57 per cent to 43 per cent against the centre-right bloc. Five Star had demanded a snap election if Renzi is defeated as it looks to force another referendum — this time on taking Italy out of the euro. Still, a poll last month showed only 15 per cent favoured leaving the single currency and 67 per cent were self-described single-currency believers.
Along with Padoan, other possible successors who might be asked to lead a caretaker government include Senate Speaker Pietro Grasso and Culture Minister Dario Franceschini. The country’s mainstream parties have been preparing contingency plans to ensure a government would keep functioning if Renzi was forced out.
“I don’t believe the ‘No’ vote in the referendum will lead to a major crisis in Italy,” Alain Bokobza, head of global asset allocation at Societe Generale SA, said.
“In the end the major question we’re facing in Italy — this is the most important one — is are we going to have early elections for the parliament or not.” He expected there would not be, and a caretaker government would take over after Renzi quits.
The Italian referendum kicked off a year of voting with establishment parties across Europe threatened by upstarts channelling voters anger at immigration and economic stagnation. Anti-Islam, EU-sceptic Freedom Party leader Geert Wilders is vying to place first in Dutch elections in March, while French President Francois Hollande last week declined to seek a second term, leaving the Republican Francois Fillon as the main opponent to the anti-immigration Marine Le Pen.
German Chancellor Angela Merkel will run for a fourth term, with the anti-immigration Alternative for Germany party branding her public enemy no. 1. In Austria, the populists suffered a setback on Sunday when the environmentalist Alexander Van der Bellen defeated Norbert Hofer of the nationalist Freedom Party in a presidential runoff.
Renzi campaigned intensively for weeks to in an attempt to salvage his plans to reform Italy. He travelled across the country and used Facebook Live sessions to push home his message that the reform would bring more stable government to Italy, a country which has seen 63 administrations since the Second World War.
In his referendum campaign, the former mayor of Florence had sought to line up against the elites. He argued that the reform would land a blow against the ruling class which he said has paralysed Italy for decades, and insisted he was different from Roman politicians. It wasn’t enough.
“I have lost,” Renzi said in his night-time statement. “I wanted to get rid of jobs for the boys in politics, and it’s my job that is going.”
