Blow to EU: Italy’s Pro EU Prime Minister Resigns After Voters Crush His Reforms
Italy held a referendum this Sunday in which 60% of voters rejected Prime Minister Matteo Renzi’s constitutional reforms. The crushing loss convinced him to resign.
The reforms, designed to speed up the legislative process by limiting the powers of the upper house Senate and regional authorities, were to have been Renzi’s legacy.
Renzi, elected less than two years ago, had promised to shake things up and push hidebound Italy in a new direction. He portrayed himself as a “demolition man” who would crash through Italy’s powerful bureaucracy.
Sunday’s vote followed months of rancorous campaigning that had Renzi fighting against all of Italy’s major opposition parties. “My government ends today,” stated Renzi on Monday after his resignation announcement threw the euro zone’s third largest (and heavily indebted) economy into political mayhem.
“I take full responsibility for the defeat,” added Renzi as he promised to hand in his official resignation to the nation’s president on Monday.
The “no” vote and Renzi’s subsequent resignation was also bad news for the EU, which is still struggling to overcome an array of crises including massive immigration and the Brexit decision.
The euro has dropped to 20-month lows against the US dollar, and markets now worry that the turmoil following Renzi’s decision could awaken a dormant financial crisis and destroy the nation’s fragile banking system.
Monte dei Paschi di Siena (Italy’s third largest bank) recently announced that it needed to raise $5.3 billion to stave off financial collapse, but investors are likely to ignore the bank’s troubles amidst the current chaos. A state intervention will be the only option if the bank fails to attract investors.
Renzi’s resignation could also pave the way for the Five Star Movement, an anti-euro party that wants to withdraw the nation’s membership of the euro currency. The insurgent group, which is now pushing to open national elections a year ahead of schedule, is virtually tied with Renzi’s Democratic Party (DP) in the polls.
“Today the arrogance that’s remained in power these last years has lost,” announced Luigi Di Maio, Five Star’s predicted PM candidate. “So ends the era of shortcuts and tweets.”
Italy is no stranger to chaos. In the past 70 years, the peninuslar nation has had 63 different governments. What happens next will depend heavily on President Sergio Mattarella, who is now tasked with choosing a person to form Italy’s next government.
Editor’s note: If the anti-euro party does indeed gain momentum, we could see an exit vote like the shocking ‘Brexit’ of last June where Great Britain voted to leave the EU. Some have already predicted the end of the EU after Britain’s exit. This could be the begining of an avalanche.