Italy’s Renzi to resign after referendum rout

Reuters: Italian Prime Minister Matteo Renzi is set to resign on Monday after suffering a crushing defeat on Sunday in a referendum on 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.

The euro briefly tumbled overnight to 20-month lows against the dollar, as markets worried that instability could reignite an EU debt crisis and deal a hammer blow to Italy’s fragile banking sector, especially the troubled Banca Monte dei Paschi di Siena. However, by early in the European morning it had largely rebounded.

Monte Paschi shares were suspended, initially falling 7 percent before bouncing back to a 1-percent decline. Yields on Italy’s benchmark 10-year bond soared to more than 2 percent, but then also retreated back below that mark.

Economy Minister Pier Carlo Padoan, seen as a possible candidate to replace Renzi, will miss scheduled meetings with European finance ministers in Brussels on Monday and Tuesday, a Treasury source said.

Italian Prime Minister Matteo Renzi speaks during a media conference after a referendum on constitutional reform at Chigi palace in Rome, Italy – REUTERS

Renzi’s resignation could open the door to early elections next year and to the possibility of an anti-euro party, the opposition 5-Star Movement, gaining power in the heart of the single currency. 5-Star campaigned hard for a ‘No’ vote.

“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.

“I will greet my successor with a smile and a hug, whoever it might be,” he said, struggling to contain his emotions when he thanked his wife and children for their support.

“We are not robots,” he said at one point.

“No” won an overwhelming 59.1 percent of the vote, according to the final count.