Obama tells Renzi that US, Italy will remain close allies

Now that Senate reform is off the agenda, the new government’s main task will be to rewrite legislation governing elections to the Chamber of Deputies (the lower house).

Mr Berlusconi himself was forced to resign in 2011 amid growing worldwide concern over Italy’s sovereign debt crisis and was replaced by economist Mario Monti, without elections.

One consultancy, the London-based Centre for Economics and Business Research, thinks the chances of Italy still using the euro in five years’ time have fallen below 30 percent following the rejection of Renzi’s constitutional reform plan in a referendum Sunday. That legislation formed the first part of a broader constitutional reform package that Renzi championed-and it’s now pretty much redundant.

The fall continued after Mr Renzi announced his intention to resign. However, if the crisis were to become acute, there is a risk that the Italian government might have no choice but to go through with an unpopular “bail-in” of the banks, where an institution’s creditors and depositors take a loss on their holdings.

Mr Renzi met with the President at the presidential palace, the Quirinale, on Monday in order to formally submit his resignation, saying his government had lost its mandate and he could no longer govern.

She is expected to make it into the runoff in France’s presidential election in May. The other is to set up an interim government and eventually call for new elections if this attempt fails. Please see our terms of service for more information. The country’s 10-year bond yield is at 2 percent, still very low by historical standards and far below the 7 percent that Italy experienced in 2012. A crucial ruling by the constitutional court on the legitimacy of the current electoral law, known as the Italicum, is not expected until the early months of 2017. The alternative is a new election, but this scares conventional politicians in Italy and elsewhere in Europe.

Finance Minister Pier Carlo Padoan is the favourite to succeed Renzi as prime minister and the outgoing leader may stay on as head of his party – which would leave him well-placed for a potential comeback to frontline politics at the next election, whenever it is. Furthermore the out-going prime minister himself has made it clear that his resignation is unequivocal.

A possible, albeit unlikely, alternative would be a “Grand Coalition” with the Five Star Movement, the Democratic Party and Forza Italia.

It would be more destabilising if he steps down as party leader than as prime minister. Renzi’s reforms would have recentralised power by ensuring that Rome took back responsibilities from provinces in areas like infrastructure and energy projects.

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

In any case, the new government would be short-lived.

The banking system in particular requires some immediate attention. At worst, they say, Italy’s shaky banks could need some extra rescue money. The government crisis will likely reduce the financial and political space for this type of intervention.

Italy has suffered for years from a stagnant economy, and more recently has faced a migration crisis as the arrival point for hundreds of thousands of Africans crossing the Mediterranean from Libya.