Italy sank into political limbo after Prime Minister Matteo Renzi announced his resignation on the back of a crushing defeat over his constitutional referendum, triggering renewed financial turbulence for Europe.
The premier was due to hand in his resignation to President Sergio Mattarella on Monday afternoon, after Renzi’s proposal to rein in the power of the senate was rejected in a referendum by 60 percent to 40 percent, with almost all votes counted. Renzi signaled that he won’t stay on to help stabilize a caretaker administration.
The euro fell to a 20-month low, while stock index futures and Italian bonds slumped as the prospect of mounting political risk buffeted financial markets. Much of the focus is on Banca Monte dei Paschi di Siena SpA, which is in the middle of a 5 billion-euro ($5.3 billion) capital raising. Its stock has fallen 83 percent this year and a third of its loan book has soured.