Banks tackled after referendum – Renzi (2)

A blackout on opinion polls was imposed two weeks before the vote, at which time the “No” camp was leading by up to 11 percentage points.

Here are some central questions thrown up by the ballot.

Come December 4 and Italians will vote on constitutional changes that would limit the power of the upper house and make it easier for governments to pass legislation.

Renzi’s proposed changes would ultimately reduce the role of the Senate and transfer power to the central government from the regions.

Mr Renzi got parliamentary approval for the overhaul, but failed to secure the backing of two-thirds of lawmakers. Even if early elections were called after a Renzi defeat, Five Star’s chances of getting into power would depend on changes to the electoral system.

The head of state might urge him to rethink his decision for the sake of political and market stability.

Instead, Open Europe senior policy expert Vincenzo Scarpetta predicts incumbent finance minister and respected technocrat Pier Carlo Padoan could take over.

Economist Mario Monti, who led a technical government in Italy between 2011 and 2013 and is against the proposed reforms, said on Italian TV that he didn’t see “any reason in the world” why Renzi should leave if defeated. “Italians realize this is not about Renzi, but about how the country should be governed for years to come”.

Renzi will also emerge highly bolstered on the European stage.

Markets are bracing for a string of failures in the Italian banking system and a possible European Union bail-out, fearing defeat for Matteo Renzi’s reformist government in a crucial referendum this weekend.

As many as eight of Italian lenders could buckle amid a crisis of investor confidence in the country, it is feared.

Financial markets have lost ground recently as the likelihood of a “No” vote has risen.

Italy’s 10-year bond yield was down 8 basis points at 1.98 percent, having touched a fresh one-week low of 1.97 percent after the report.

The ECB report showed the epicentre of the problem is in Italy, where 14 large banks sit on 286 billion euros of so-called “non-performing exposure” – loans, debt securities and off-balance sheet items that aren’t being repaid.

It may also be unlike the U.K. Brexit vote or the U.S. Trump presidential victory in that it will not be a surprise but financial market reaction will be worse than expected. The prime minister has vowed to step down if the referendum is rejected, which many polls predict is likely.

He said: “The Italian referendum will not have much effect”.

The Eurosceptic party has been actively campaigning for a referendum on exiting the single currency.

The index’ overall eurozone breakup probability reading rose to 24.1 percent this moth, “reinforcing the notion that a surprisingly strong anti-euro sentiment has evolved during 2016”. It was also said to have demanded that Iran’s production be frozen at the current level of 3.8m barrels per day.