Will Italy’s political drama spawn a new eurozone crisis?

The 41-year-old Prime Minister Matteo Renzi is slated to hand in his resignation Monday after only 2 1/2 years in office and after acknowledging his stinging defeat in Sunday’s referendum.

Elsewhere, the New Zealand dollar (NZD=D4) fell nearly one percent to $0.7070 after Prime Minister John Key, who won praise for his economic stewardship after the global financial crisis, unexpectedly announced his resignation. Given his failure, he was forced to resign and the Italian President will be forced to call for elections for a new government in 2017.

Le Pen is already relishing the challenge and happily watched Sunday’s implosion of Italy’s political establishment.

It was not immediately clear if Renzi would retain enough support in his PD to remain party leader – a role that could give him a say in who becomes the next prime minister.

“Looking at markets today, if you didn’t know [the referendum results], you wouldn’t notice it”, he said, even though “longer term, this is not good news”.

“This referendum was seen more as a judgement call on Renzi’s premiership than the reforms on offer; by rejecting the PM, Italy has displayed the same kind of anti-establishment populist sentiment that has defined 2016 for the United Kingdom and US”, said Spreadex analyst Connor Campbell.

Milan’s main bourse ended down 0.2 percent after falling as much as 2 percent.

Here’s a look at the potential economic implications of Italy’s political drama. This referendum also envisioned the simplification in the law-making process and planned to allow the House to pass laws and votes of “No Confidence” in the government.

Yesterday, Italians rejected the establishment in a referendum by voting against constitutional changes proposed by the government.

Analysts agree that the big winners in the referendum are the two major euroskeptic parties – the anti-immigration Northern League and the maverick 5-Star Movement, which waged the most vitriolic campaigns.

In a video posted on Twitter (in Italian), Mr Renzi defended his record, saying exports and job numbers were up and unemployment was down to 11.7%.

In that scenario, Italy would be likely to undertake a state-led precautionary recapitalisation of MPS, these people said. Voter turnout was also higher than expected, showing just how badly the Italians wanted to bid Renzi arrivederci.

There are obligations and deadlines which Italy’s institutions will have to honour “guaranteeing a response that meets the problems of the moment”, he said.

Investors see Italy as the biggest risk to the future of the eurozone, and they’ve been selling the country’s bonds in recent weeks.

“We are certain that the president of the republic will know how to pinpoint the most correct solution to assure Italians. the possibility to vote and finally choose, after three non-elected governments”, Berlusconi said.

“I don’t think there is reason to talk about a euro crisis”, German Finance Minister Wolfgang Schaeuble told reporters in Brussels before a gathering of his euro-area counterparts.

Theresa May’s official spokeswoman said that the Prime Minister would seek to speak with Mr Renzi – who remains in office until his successor is appointed – over the coming days.

But Italians were not thinking about the European Union as they went to the polls Sunday.

What will it do to the economy?

Initial market reaction to Renzi’s departure has been subdued.

The euro fell 1% to the dollar, but stocks are doing fine with the FTSE Europe up almost 2%. By some estimates, Italian banks need an injection of €40 billion to build up their buffers to acceptable levels.

But there are concerns over the long-term financial stability in the eurozone’s third largest economy.