But when Renzi announced he would resign as a effect of the outcome of the referendum, the eurozone’s single currency regained much of its earlier losses, dipping only around 1 percent against the greenback on Monday morning.
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German Chancellor Angela Merkel said on Monday she was “sad” that Italian Premier Matteo Renzi had lost a referendum on key constitutional reforms to overhaul the country’s political machinery.
“The president of the republic received the prime minister, Matteo Renzi, at the Quirinale palace this evening”.
But the referendum was more than a vote on constitutional reform, it was widely regarded as a chance to reject establishment politics.
“No” won an overwhelming 59.1 percent of the vote, according to the final count.
In an emotional televised address, he accepted full responsibility for the “extraordinarily clear” defeat and said he would tender his resignation after meeting his cabinet on Monday.
He formally handed in his resignation to Mattarella after the country’s 2017 budget was approved in Senate.
Italian President Sergio Mattarella told Italian premier Matteo Renzi, who made a decision to resign after a humiliating defeat in a referendum on government-championed reforms, to stay in office a bit longer until the critical budget law is passed. The president, who serves as the ultimate political arbiter in times of crisis, told Renzi to see through the passage of the budget, so as to prevent emergency funding rules from kicking in at the start of the year. Opposition parties, including the anti-euro 5-Star Movement, are pressing for the elections to be held soon.
Mattarella will then be charged with brokering the appointment of a new government or, if he can’t do that, ordering early elections.
Elections are scheduled for spring 2018, but Mr Renzi’s humiliating defeat in the referendum will likely hasten that date considerably, possibly bringing a vote in spring 2017.
He added the PD would also be open to a national unity government including all major parties, with the aim of overseeing a new electoral law, and the global appointments awaiting Italy in 2017. Renzi’s party may be asked to form a new government, perhaps in coalition with the center right.
Grillo is now a realistic possibility for the next prime minister – and he has already called for an election “within a week”.
“(The result) has marginally increased the likelihood of a crisis like in 2011 or something, but even a full-blown crisis.is not in itself something that is a meaningful burden for the euro”, said Commerzbank’s head of currency strategy in Frankfurt, Ulrich Leuchtmann, referring to the spiralling of Italian borrowing costs five years ago.
Italy’s main stock market index fell by about 1 percent, but European stocks were otherwise trading slightly firmer and USA stock futures were also positive.
The banks remain weak and the country’s debt-to-GDP ratio, at 133%, is second only to Greece’s.
“I’d not speak of a euro crisis today”, VP Bank Chief Economist Thomas Gitzel told Reuters.
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Amid fears that Italy’s third-largest bank, Monte dei Pasci di Siena is heading for a state bailout in coming days, euro zone finance ministers meeting in Brussels sought to calm nerves about weaknesses in the Italian banking sector.
