Italy’s Future Uncertain but Rejection of Euro Not on the Cards

Renzi announced his resignation after his plan to reform the constitution was rejected by voters.

Mattarella will then be charged with brokering the appointment of a new government or, if he is unable to do that, ordering early elections. After a shaky start, even Italy’s fragile banking system – which must raise some $21 billion over the coming months – staged a comeback on the Milan stock market.

The biggest immediate loser from the “No” triumph in Italy could be Italy’s 3rd-largest bank, Monte dei Paschi di Siena, which is bowed by bad loans and is looking to raise Euro 5-B ($5.3-B) this month to stave off collapse.

With most ballots counted, the No vote leads with 60% against 40% for Yes, with a 70% turnout.

Like David Cameron over Brexit, Renzi had staked his political future on a plebiscite and fell victim to an anti-establishment revolt.

If approved, the measure would have weakened the power of the upper house in the Italian Parliament, cutting the number of its members from 315 to 100.

Renzi had vowed ahead of the referendum to step down if his proposals were rejected, saying his proposed reforms were necessary to give him the power to push through reforms to strengthen Italy’s sluggish economy. 5-Star campaigned hard for a “No” vote.

But Italians were not thinking about the European Union as they went to the polls Sunday. Angst about Italy makes an uncomfortable bedfellow and there’s plenty for them to worry about. That has resulted in Renzi looking exactly like the mainstream politician he dismissed at the outset of his premiership.

“But it is of course a domestic Italian decision that we must respect”, she added. Eurozone beware and European Union be warned.

The market reaction suggests that investors had been prepared for the referendum results and don’t believe the fallout in the Eurozone’s third-largest economy will have a wide impact.

The Italian result had been widely expected, though the size of the “No” vote, at with 59.1%, was more emphatic than had been forecast.

While the polls had pointed to a victory of the “no” vote, investors have grown increasingly skeptical of such polls, given the major surprises in both the United Kingdom and the United States this year.

Five Star says it is getting ready to govern Italy.

Grillo called for immediate elections and said that from next week the party would begin putting together a policy platform and a cabinet team so that Italians would have all the information they needed to put the party into power.

If all else fails, there may be early elections in 2017.

The most probable scenario is a caretaker administration dominated by Renzi’s Democratic Party taking over before an election that has to take place by March 2018.

Finance Minister Pier Carlo Padoan is a potential candidate for premier along with Transport Minister Graziano Delrio, Culture Minister Dario Franceschini and Senate Speaker Pietro Grasso.

But Marine Le Pen, the leader of France’s National Front, who is hoping to ride the populist tide to victory in the French presidential elections, praised Mr Hofer’s party for a campaign “fought with courage”.