Italian PM Matteo Renzi resigns after crushing referendum defeat

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“I take full responsibility for the defeat,” Renzi said last night (Source: Getty)

​The euro dived to a 20-month low in the early hours of this morning after Italian Prime Minister Matteo Renzi said he would resign following a crushing defeat in the country’s referendum on constitutional reform.

Voters comprehensively rejected Renzi’s flagship proposals to streamline parliament, predominantly by cutting the size and power of the Senate.

At the time of going to print this morning, the “No” campaign was leading by 59.7 per cent to 40.3 per cent with nearly 30m votes counted.

Alongside an expected period of political instability, some traders and analysts fear the outcome could see Italy’s troubled banks plunged into further turmoil.

Read more: Exit polls suggest Italian PM Matteo Renzi defeated in referendum

The country’s lenders are already burdened with some €360bn (£301.5bn) in non-performing loans, and could be especially vulnerable to market shocks.

Shares in the Italian banks had already sunk in the run up to yesterday’s referendum. At the end of last week Unicredit’s shares were around seven per cent lower than they were a month ago, Monte dei Paschi’s were 24 per cent lower and Banco Popolare’s were 14 per cent lower.

A banking crisis in the Eurozone’s third-largest economy could pose yet another existential threat to the single currency, according to some investors.

Read more: Matteo Renzi: Italian banks not the bane of Europe

Some of Renzi’s most fierce political opponents oppose Italian membership of the euro, in particular the 5-Star party which has drawn level with Renzi’s Democratic Party according to polls.

“I take full responsibility for the defeat,” Renzi said last night, addressing the Mediterranean nation.

“In Italian politics no one ever loses. I lost, and I say that loudly. My government ends here.”

The euro dropped as far as $1.051 late last night, after starting the week’s trading at around $1.065.

It was the sharpest fall since June. At the time of going to print, the single currency was trading at around $1.056. Italian shares and bonds are expected to face a tough day of trading today.

In other news: New Zealand Prime Minister John Key unexpectedly announced his resignation this morning, saying it was the “right time” to leave politics. Key said he had no immediate future plans, but told reporters he would stay in parliament long enough to avoid a by-election for his seat.

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