The Asian Age

Italy PM quits after defeat in vote

Populists rejoice as voters says ‘no’ to PM’s call for major constituti­onal reforms

- ELLA IDE Italy’s PM Matteo Renzi

Italian Prime Minister Matteo Renzi prepared to hand in his resignatio­n on Monday after suffering a ruinous referendum defeat that has sparked fresh jitters about the fate of a united Europe.

“My experience of government finishes here,” said a downcast Mr Renzi after acknowledg­ing a defeat of almost 60-40 per cent over his constituti­onal reform bid, which cast a shadow over the short, and long-term future of the eurozone’s third-largest economy.

Mr Renzi, 41, was due to meet President Sergio Mattarella later on Monday to hand in his resignatio­n formally after a final cabinet meeting.

Mr Mattarella will then be charged with brokering the appointmen­t of a new government or, if he is unable to do that, ordering early elections.

Italy’s FTSE MIB stock index tumbled 2.0 per cent at the opening before clawing back some ground, underperfo­rming other European markets. Italian bond yields also rose slightly.

However, traders were reassured in part by the result of Europe’s other crucial vote this weekend, which saw Austria reject a populist, far-right candidate for president.

“The next steps are far from clear for Italy and traders are not panicking yet”, said Craig Erlam, senior market analyst at Oanda.

Some analysts said the referendum could come to be seen as a landmark moment.

Holger Schmieding, at the Berenberg private bank, said the risk that Italy could choose to leave the euro, while still remote, had increased.

Capital Economics said: “Italy has taken the first step along a path that could lead it out of the eurozone.”

Populists in Italy and throughout Europe rejoiced at Mr Renzi’s downfall, with the founder of the anti-establishm­ent Five Star movement Beppe Grillo calling for an election “in a week”.

Italian Prime Minister Matteo Renzi said his goodbyes on Monday after a ruinous referendum defeat that was cheered by populist leaders and sent shockwaves rippling around Europe.

“My experience of government finishes here,” said a downcast Mr Renzi after accepting a defeat of almost 60-40 per cent over his constituti­onal reform bid.

The result, coming on the coattails of Brexit and Donald Trump’s US election win, has plunged Italy into a period of political uncertaint­y and cast a shadow over the short- and long-term future of the eurozone’s third-largest economy.

After a first meeting with President Sergio Mattarella to discuss his departure, Mr Renzi posted a link on his Facebook page defending his record since he came to power in February 2014.

“1,000 difficult but wonderful days. Thanks to everyone. Viva l’Italia,” he wrote. Mr Renzi, 41, was expected to formally tender his resignatio­n to Mr Mattarella after a final Cabinet meeting.

Mr Mattarella will then be charged with brokering the appointmen­t of a new government or, if he is unable to do that, ordering early elections.

Populists across Europe rejoiced at Mr Renzi’s downfall, with the founder of Italy’s own anti-establishm­ent Five Star movement Beppe Grillo calling for an election “within a week”.

Mr Grillo said a snap election should be held on the basis of a recently adopted electoral law designed to ensure the leading party has a majority in the Chamber of Deputies, despite having previously called for this to be changed.

Observers varied widely in their interpreta­tion of the vote. Britian’s euroscepti­c Nigel Farage, who spearheade­d the “Brexit” campaign, said it looked “more about the euro than constituti­onal change”.

But former Bank of Italy economist Lorenzo Codgno insisted: “The outcome of the referendum is much more complex and nuanced than ‘just another wave of protest across the globe’.”

Giovanni Orsina, Professor of Politics at Rome’s Luiss university, said four out of five voters had cast their vote politicall­y rather than on the merits of the reform.

“The vote has broad similariti­es with the Brexit and Trump phenomenon­a,” he said. “The electorate voted against the establishm­ent, against Brussels. They didn’t get into the subtleties.”

Poll data showed the No vote was strongest in areas with high unemployme­nt, in the relatively poor south of the country and amongst youth, pointing to a correlatio­n with levels of disaffecti­on.

Most analysts see immediate elections as unlikely, partly because all the main political parties have already begun discussion­s on revising the country’s electoral laws.

As things stand the two houses of parliament would be elected by two different systems, which is seen as a recipe for a postvote stalemate nobody wants.

The most probable scenario is a caretaker administra­tion dominated by Mr Renzi’s Democratic Party taking over to complete the electoral reform before an election that has to take place by March 2018.

The new administra­tion’s most pressing priority will be finalising the country’s 2017 budget, which the European Commission has threatened to reject as too expansiona­ry given Italy’s debt levels.

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