Italy referendum: PM Matteo Renzi resigns after clear defeat

Media captionMatteo Renzi: “I lost and I say this out loud even if with a lump in my throat”

Italian Prime Minister Matteo Renzi has resigned after suffering a heavy defeat in a referendum over his plan to reform the constitution.

In a late-night news conference, he said he took responsibility for the outcome, and said the No camp must now make clear proposals.

With most ballots counted, the No vote leads with 60% against 40% for Yes.

The turnout was nearly 70%, in a vote that was seen as a chance to register discontent with the prime minister.

“Good luck to us all,” Mr Renzi told reporters. He said he would tell a cabinet meeting on Monday afternoon that he was resigning, then tender his resignation to the Italian president.

  • Live updates
  • Watch market reaction

Image copyright

Sleepless nights in Brussels – BBC Europe editor Katya Adler in Rome

EU leaders won’t have slept much on Sunday night. Angst about Italy makes an uncomfortable bedfellow and there’s plenty for them to worry about. Particularly in Brussels. Prime Minister Renzi was the only premier left in Europe with a vision for the EU’s future. Angela Merkel is too busy crisis-managing while much of France is in thrall to Front National eurosceptics.

But Matteo Renzi is no more. The self-styled reformer with his promise to stabilise politics and kick-start the Italian economy has managed quite the reverse.

Italy wakes up on Monday to the threat of a banking crisis, political turmoil, and a group of anti-establishment populists banging on the doors of government. Eurozone beware and EU be warned. Italy is the euro currency’s third largest economy and it’s in for a bumpy ride. And there are more unpredictable votes to come in 2017: in France, Germany, the Netherlands and perhaps here in Italy too.

Why did he lose?

Matteo Renzi staked his political future on his attempt to change Italy’s cumbersome political system. He wanted to strengthen central government and weaken the Senate, the upper house of parliament.

His opponents – including some within his own party – had argued that the reforms would give the prime minister too much power. The electorate agreed.

Image copyright

Image caption

“I lost and the job that goes is mine” – Matteo Renzi after losing the battle for reform

But the referendum was more than a vote on constitutional reform, it was widely regarded as a chance to reject establishment politics.

It was a resounding victory for the No camp, a medley of populist parties headed by the Five Star Movement, which capitalised on Mr Renzi’s declining popularity, years of economic stagnation, and the problems caused by tens of thousands of migrants arriving in Italy from Africa.

  • Euro wobbles after Italy exit polls
  • Why Italy’s vote matters

Has this strengthened anti-establishment parties?

The No vote’s victory was even bigger than the last opinion poll in November had predicted.

Five Star says it is getting ready to govern Italy. Its leader Beppe Grillo said an election should be called “within a week”.

Image copyright

Image caption

Spontaneous celebrations in the streets of Rome, after the referendum defeat and resignation of PM Matteo Renzi

Another opposition leader Matteo Salvini, of the anti-immigrant Northern League, called the referendum a “victory of the people against the strong powers of three-quarters of the world”.

What will happen next?

Mr Renzi will hand in his resignation to President Sergio Mattarella after the final cabinet meeting.

The president may ask him to stay on at least until parliament has passed a budget bill due later this month.

In spite of the pressure from the opposition, early elections are thought to be unlikely.

Instead, the president may appoint a caretaker administration led by Mr Renzi’s Democratic Party, which would carry on until an election due in the spring of 2018.

Finance Minister Pier Carlo Padoan is the favourite to succeed Mr Renzi as prime minister.

How will this go down elsewhere in Europe?

The result is being seen as a blow to the EU, although there is no question of Italy following the UK out of the door.

Both Five Star and the Northern League are opposed to the eurozone but not to membership of the EU itself.

So far, mainstream EU politicians have been slow to react.

EU Economics Commissioner Pierre Moscovici dismissed the referendum as a domestic issue and said it was not a vote against the EU.

“It’s a solid country with solid authorities and I have complete confidence that Italy can handle this situation,” he told French TV.

The Governor of the Bank of France, Francois Villeroy, who is also a policymaker for the European Central Bank, put a brave face on it.

“The referendum in Italy yesterday may be deemed as another source of uncertainty,” he said. “However, it cannot be compared to the British referendum: Italian people have been called to the polls to vote on an internal constitutional matter, and not on Italy’s long-standing EU membership.”

Image copyright

But the leader of far-right Front National in France, Marine Le Pen, tweeted her congratulations to the Northern League.

“The Italians have disavowed the EU and Renzi. We must listen to this thirst for freedom of nations,” she said.

What will it do to the economy?

Markets seemed to have taken Mr Renzi’s departure in their stride. Stocks and the euro fell in early trading in Asia but there were no signs of panic, as the possibility of his resignation had already been factored in.

But the referendum result could have longer-term implications.

There have been growing concerns over financial stability in the eurozone’s third largest economy.

Italy’s economy is 12% smaller than when the financial crisis began in 2008.

The banks remain weak and the country’s debt-to-GDP ratio, at 133%, is second only to Greece’s.

There is a risk that the failure of a major bank could set off a wider crisis, but repairing the banks becomes more difficult amid political uncertainty.

One of the threatened banks is the world’s oldest and Italy’s third-largest, Banca Monte dei Paschi di Siena, which has been ordered by the European Central Bank to reduce its holdings of bad debt.

The bank is trying to raise new capital to the tune of €5bn, but a consortium which had hoped to organise a rescue plan will meet on Monday morning to review its options.

With Mr Renzi gone, and populist parties on the rise, the question is whether Italy can keep a lid on the problems.