How Populism Helped Oust Italy’s Prime Minister

Japan’s Nikkei share average rebounded on Tuesday as strong USA economic data helped offset worries about instability in the European Union after Italian Prime Minister Matteo Renzi’s resignation.

Italy’s president has asked Premier Matteo Renzi to delay stepping down until parliament can pass a critical budget law due later this month.

Opposition to the proposed constitutional changes did not just come from the populist Five Star Movement and the nationalist Northern League, but also from mainstream political figures.

Depending on the outcome of Mattarella’s talks with the different parties and on who gets the mandate to lead a new government, the next national election could take place either in 2018 at the end of the current legislature, or as early as spring 2017.

But that course is already facing opposition.

“It wanted to eliminate the excessive seats of power….”

European partners sought to downplay the risk for the common euro currency and European unity. “It is not the demise of the Western world but it is not a positive contribution in the midst of our crisis situation in Europe”, he said through a spokeswoman.

“Italy is a strong country, it’s a reliable country”, European Union Economic and Monetary Commissioner Pierre Moscovici said.

Not many people are taking the results of Sunday’s vote in Italy seriously.

The Five Star Movement (M5S), which spearheaded the No campaign, will undoubtedly be strengthened by the landslide victory, as will the other groups which called for a No vote.

Center-right opposition parties and the Five-Star Movement (M5S) – which is now Italy’s second largest party – are clamoring for early elections.

The main stock index in Milan was volatile. La Vanguardia wrote: “The failure of Renzi opens a crisis in Italy and the European Union”.

Meanwhile, the European Central Bank is acting as a big backstop in bond markets, indirectly protecting Italy’s borrowing rates from rising too much. It could also prevent urgent action on the country’s ailing banks.

Of the 10 most populous provinces in Italy, all opted to vote against his complex constitutional reforms. The country has public debt worth 130 per cent of GDP, a huge sum.

“The people have won”, Matteo Salvini, head of the Italian anti-immigrant Northern League party, said on Twitter, with Marine Le Pen of France’s far-right National Front sending him and the Italian people “congratulations on this attractive victory”. The Nasdaq composite outperformed, closing 1 percent higher. “Since Italy joined the euro in 1999, it simply hasn’t grown on average”. Italian financials shed more than 3 percent as a 5 billion euro rescue plan for Monte dei Paschi di Siena hung by a thread. Advisers are meeting to discuss the vote’s impact, according to Italian media.

Analysts are particularly concerned about Italy’s banking industry, which is seen as vulnerable to a loss of confidence.

Renzi swept into power two-and-a-half years ago on a pledge to dismantle the system, claiming the moniker of demolisher.

“Global risk sentiment roared back after falling prey to the initial Renzi fallout and whatever negatives Italy creates for the eurozone, yesterday was not the time for a euro implosion”, said Stephen Innes, senior trader at online FX platform, OANDA.