Italian PM announces resignation after defeat in constitutional referendum

Just how Italy appoints its new leader remains to be seen.

While the referendum result will be widely seen as a personal failure for Renzi, it is also being perceived as a heavy blow to European Union bureaucratic elites. “We must listen to this thirst for freedom of nations”. It was the sharpest fall since June and opened the way to a retest of the March 2015 trough around US$1.0457. It celebrated the No vote as a victory for democracy and voter damnation of the apparent power grab by Mr. Renzi.

The No campaign in Italy has been spearheaded by the the anti-establishment Five Star Movement, led by Beppe Grillo.

It would appear that, for the third time in 2016 following Brexit in the United Kingdom and the U.S. residential election triumph of Donald Trump last month, a national electorate has opted to register an emphatic protest vote.

However, the referendum was widely thought to act as a litmus test for the rising wave of populism spreading in Europe, and the chance to register discontent with the current government.

The polls were published by a range of television networks in Italy but have not been verified by actual vote counts.

The referendum was held as a part of an effort by the Renzi government to reform the Italian constitution, reduce the power of the Senate, reduce the number of Parliament members and expand the powers of the executive branch.

“Expect volatility premiums to rise and the euro to trade below US$1.05 against the USA dollar, potentially testing last year’s low of US$1.0460 in a “no” vote scenario”, Petr Krpata, ING Groep NV’s London-based chief foreign-exchange strategist for Europe, Middle East and Africa, said before the referendum. She is expected to make it into the second voting round.

Mario Baczak, a 23-year-old economic graduate working at the Slow Food stall, said Renzi was trying to create a “democratic dictatorship” and had to go.

In one relief for mainstream Europe, Austrian voters roundly rejected on Sunday a candidate vying to become the first freely elected far-right head of state in Europe since World War Two, choosing instead a Greens leader as president. At 30 per cent, M5S is polling roughly equally with the ruling Democrats.

President Sergio Mattarella could ask him to form a new government or appoint a technocratic prime minister to serve until elections due in 2018.

Ahead of the polls, many analysts voiced their concern over the possible instability a “No” vote could usher in, and what effect that might have on global markets.

The biggest immediate loser from the No triumph in Italy could be Italy’s third-largest bank, Monte dei Paschi di Siena, which is bowed by bad loans and is looking to raise 5 billion euros (US$5.3 billion) this month to stave off collapse.

The euro is diving as Italy’s prime minister resigns amid a landslide defeat in the Italian referendum vote. “MPS would then need to be rescued. From the day after the referendum, this most likely turns into a banking story”.

Opposition parties are determined to push forward a breakaway from Brussels, and with Brexit increasing anti-EU sentiment across the continent, they will prepare for a fight to topple the Union.

The euro fell to a 20-month low as he spoke.

But as David Scutt writes, the question that most will want answered is whether Renzi will step down as PM, which he promised to do should the proposed reforms be rejected.