Italy PM key to holding off populist party

Italian Prime Minister Matteo Renzi (C) arrives at Quirinale Presidential palace in Rome, Italy, December 5, 2016.

Italian Prime Minister Matteo Renzi is to resign on Wednesday, after his resignation was delayed when he conceded defeat following the referendum on constitutional reform.

Once the budget was passed, he could hand in his resignation, the palace said in a statement. The size of the “No” vote, at 59.1 per cent, was more emphatic than had been forecast.

Ettore Greco, director of the Institute of International Affairs, a Rome-based thinktank, said he thought Mr Renzi would push for early elections and had a good chance of a comeback.

But, in a decision widely expected, Mattarella told Renzi “to delay his resignation until that task (of the budget law) is completed”. If Renzi declines to reconsider, or the President does not open a round of consultations with party leaders to find a new prime minister, investors will not be at peace. Renzi acknowledged defeat in a constitutional referendum and announced he will resign on. But opting for a state bailout for BMPS could not only raise problems with European competition authorities but it could also spark further anti-European sentiment among Italian voters.

Mr Renzi is thought to favour early elections or a caretaker government.

About 33 million Italians, or more than two-thirds of eligible voters, cast ballots following months of bitter campaigning that pitted Mr Renzi against all major opposition parties, including the anti-establishment 5-Star.

Some opposition forces have called for immediate elections, but this option appeared very unlikely.

Analysts say it’s more likely that Italy’s president will appoint a transition government that will help ease the uncertainty, see through the rescue of the banks and eventually call for early elections, possibly for early 2018.

Finance Minister Pier Carlo Padoan is the favourite to succeed Renzi as prime minister.

Italy’s political turmoil has also led to days of uncertainty in worldwide markets, amid questions over the fate of Italy’s indebted banks, especially its third largest, Monte dei Paschi, which is seeking €5bn (£4.2bn; $5.3bn) to recapitalise.

But, his reforms made little impact, and the Five-Star Movement claimed the anti-establishment banner, tapping into a populist mood that saw Britons vote to leave the European Union and Americans elect Donald Trump it President.

Member of the European Commission responsible for employment, social affairs, skills and labor mobility Marianne Thyssen said, “Italian people that have spoken and we fully respect their democratic choice”.

And such a system is going to make it extremely hard for single parties such as the Five Star Movement to gain power at the next elections; but, of course they are calling for a referendum on the euro.

While it would be very much lacking in Christmas spirit to give the pollsters no credit for getting this one right, the point should be made that this vote was not actually a close one, in sharp contrast to the Brexit referendum and the USA election.