Renzi starts final days as Italy premier with party huddle

The eventual choice to lead a caretaker government will probably be backed by the same centre-left coalition of parties that supported Mr Renzi. He promised to resign after the results were in, ushering in not only a political and economic crisis for Italy but for Europe as well.

Since the Italian president tries to ensure Parliament can carry out its full five-year term, analysts expect that Mr Mattarella will appoint a transition government to draft a new election law that could satisfy parties anxious that, the way the rules now stand, their forces might be at a disadvantage.

In his one-on-one morning meeting, Renzi had accepted the option of putting his departure on standby but wanted to meet with the cabinet before officially informing the president of his decision.

“The prime minister will likely have seen this coming, and to a large extent, the country will have seen this coming, that the polls and the people were moving against Matteo Renzi and his constitutional reforms”, Al Jazeera’s Jonah Hull said, reporting from Rome.

More significantly, Hofer’s victory would have signaled a new respectability to far right politics in Europe.

“There’s a large front within the Democratic party which is pushing for this”, said one official close to Mr Renzi.

Alternatively, he may bring in a nonpolitical government of experts, possibly run by Senate Speaker Pietro Grasso, before fresh elections in 2017 or 2018.

The issue is complicated by the fact that a recent reform to the electoral law only applies to the lower house of parliament now that the constitutional reform bid has failed. If such a government is not possible, then the PD wants an early election, they said.

Federico Benini, the head of the Winpoll agency, said much could be explained by turnout, which at more than 68 per cent in Italy, was some 10 points higher than expected by pollsters.

His resignation leaves Italy facing a period of heightened political uncertainty.

We believe the two most likely outcomes in the event of an Italian banking crisis are that the European Central Bank (ECB) extends liquidity to the banks and that authorities try to postpone the resolution of the crisis (i.e., deal with it in a piecemeal fashion).

The euro briefly tumbled overnight to 20-month lows against the dollar, as markets anxious that instability could reignite an European Union debt crisis and deal a hammer blow to Italy’s fragile banking sector, especially the troubled Banca Monte dei Paschi di Siena.

“I forecast there will be the will to go to elections in February”.

“This is negative for Italian assets, European shares, the euro and risk assets like shares generally and positive for safe havens like government bonds in “safe” countries, and gold and some of this reaction has already been seen today”, Mr Oliver said.