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Italy Sinks Into Political Limbo as Defeat Sweeps Renzi Away
To continueItaly Sinks Into Political Limbo as Defeat Sweeps Renzi Away
-- Finance minister cancels trip to Brussels as cabinet meets
-- Financial markets react cautiously to Italian instability
Italy fell into political limbo after Prime Minister Matteo Renzi announced his resignation, with rival parties jockeying to fill the power vacuum following his crushing defeat in a constitutional referendum.
Financial markets reversed an initial sell-off as investors came to terms with Renzi’s impending departure. The premier is preparing to hand in his resignation to President Sergio Mattarella on Monday afternoon having signaled that he won’t stay on to help stabilize a caretaker administration. Renzi met with Mattarella for informal talks on Monday morning, according to a senior state official who could not be identified as the meeting was private.
“The idea of this leading to new elections and a euro exit always was far fetched,” said Claus Vistesen, chief euro area economist at Pantheon Macroeconomics in London. “Markets now are likely getting prepared for a long period of gridlock, which is not unusual in Italy.”
European stocks gained and the euro climbed back to trade 0.3 percent higher at $1.0699 as of 1:20 p.m. in Rome, after falling to a 20-month low shortly after Renzi’s defeat.
‘A Banking Story’
Much of the attention remains on Banca Monte dei Paschi di Siena SpA, which is in the middle of a 5 billion-euro ($5.3 billion) capital raising and is vulnerable to government instability. Monte dei Paschi shares were down 4.7 percent in Milan trading. Its stock has fallen 83 percent this year and a third of its loan book has soured.
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