ITALIAN PM TO QUIT AFTER REFERENDUM ROUT RENZI SUFFERS DEFEAT IN VOTE ON CONSTITUTIONAL REFORM

HUGE SETBACK Rise of populist 5Star Movement, PM’s unpopularity were all factors

ROME: Italian Prime Minister Matteo Renzi was set to resign on Monday after suffering a crushing defeat in a referendum over constitutional reform, tipping the euro zone’s third-largest economy into political turmoil.

His decision to quit after just two-and-a-half years in office deals a blow to the European Union, already reeling from multiple crises and struggling to overcome anti-establishment forces that have battered the Western world this year.

Renzi’s emotional, midnight resignation announcement sent the euro lower and jolted stock and bond markets on concerns that early elections could follow, possibly paving the way for an anti-euro party, the 5-Star Movement, to come to power.

But financial markets bounced back later in the morning as European officials played down the prospect of a broader euro zone crisis.

Even Italy’s fragile bank sector, which is looking to raise around 20 billion euros ($21 billion) over coming months, staged a comeback on the Milan exchange after a shaky start.

European commissioner for Economic and Financial Affairs Pierre Moscovici dismissed talk of a euro zone crisis, and German finance minister Wolfgang Schaeuble urged calm. Both said Italy’s institutions are capable of handling a government change, which would be its 64th since 1946.

Italian economy minister Pier Carlo Padoan, who has pulled out of scheduled meetings with European finance ministers in Brussels this week, is viewed as a possible candidate to replace Renzi.

Senate president Pietro Grasso and Transport Minister Graziano Delrio have also been tipped as possible successors.

The government crisis could open the door to elections next year and to the possibility of the opposition 5-Star Movement gaining power in the heart of the single currency area. 5-Star, which campaigned hard for a ‘No’ vote, wants to hold a referendum instead on membership of the euro.

“I take full responsibility for the defeat,” Renzi said in a televised address to the nation, adding that he would hand in his formal resignation to President Sergio Mattarella on Monday.