Italy faces heavy economic and political uncertainty post Italy PM Matteo Renzi's referendum defeat on December 4. The Prime Minister tendered his resignation after his government's plan to reform constitution faced clear voter rejection. The Italian President will now decide whether to appoint a new PM or to hold a fresh round of elections.
The referendum generated fairly decisive results. About 60 percent voted for No, and 40 percent went for a Yes. Total turnout was 70 percent. For Renzi, his political future lies in tatters. He had staked his career in an attempt to change the country's antiquated political system. His intention was to strengthen Italy's central government and at the same time weaken Senate, the parliament's upper house. These intentions were not taken lightly by his opponents. They, along with Renzi's own party, have argued that such reforms will provide the PM much power. It seems that the electorate has also thought the same.
Such instability may lead to a bloodbath of the country's vulnerable banking sector. A banking consortium, set up to bail Banca Monte dei Paschi di Siena, a leading bank, may now reconsider whether to proceed with this intention.
For Italy, the referendum was much more than a reform of the constitution. It was regarded as a chance to throw out the staid establishment politics. The No camp – a collection of populist parties with the Five Star Movement as their leader- registered a convincing victory. The camp took opportunity of capitalizing on the declining popularity of Renzi. Their victory was also on the back of Italy's long economic stagnation and the problems sourced back to the thousands of African migrants arriving on Italian shores.
For other leaders in the European Union, it is a tense time. Brussels is clearly uncomfortable about the prospects of Italy as a constituent country of the union. Renzi was one of the few European premiers left with a vision for EU's future. Germany's Angela Merkel is busy in managing a crisis while France is listening raptly to the eurosceptics of the Front National party.
The defeat of Renzi is a blow to the EU. The person who was supposed to stabilize Italian politics and the economy has done the opposite. The country woke up on December 5 to political turmoil and a crisis in banking. Moreover, the doors of the European Union are now being banged by anti-establishment populists.