Italian voters dealt Premier Matteo Renzi a stinging defeat on his reforms referendum, triggering his resignation announcement and galvanizing the populist, opposition 5-Star Movement’s determination to gain national power soon. The outcome also energized the anti-immigrant Northern League party, an ally of French far-right leader Marine Le Pen, a candidate in France’s presidential race.
The blow to Renzi also delivered a rebuke to Italy’s industrialists, banks and other establishment institutions, which had staunchly backed the referendum. The political upset, which could spook investors, comes just as the government had made some inroads in cutting the staggering rate of youth employment and while Italy’s banks have urgent need for recapitalization.
During the campaign, the risk of political instability in Italy, Europe’s fourth-largest economy, triggered market reaction, with bank stocks sinking and borrowing costs on sovereign debt rising. The Movement, led by anti-euro comic Beppe Grillo, spearheaded the No camp on the constitutional reforms, a package aimed at updating Italy’s post-war Constitution that Renzi had depicted as vital to modernizing Italy and reviving its economy.
