Matteo Renzi has conceded defeat in the referendum he called on his constitutional reforms and announced that he is resigning as Prime Minister. NO are on course for an overwhelming victory, they are ahead by a close to 60-40 lead in the count at the moment.
Needless to say, this referendum result has profound implications for the Eurozone. The market was supposed to have priced in a defeat for Renzi, but the euro has fallen to $1.05 earlier this evening – down 1pc from Friday’s close.
Defeat will lead to calls for early elections, next year and there is a chance that these elections could lead to the Eurozone’s first anti-single currency government. At the very least, the defeat of these constitutional reforms and Renzi’s fall will add to a sense that Italy is unreformable which will heap further pressure on Italy’s banks which have €286 billion of bad loans. There’s talk of a state bailout for Banca Monte dei Paschi di Siena – which could have a domino effect on other banks.
Italy’s No vote will also influence the Brexit debate. London is the Eurozone’s financial and banking capital. If – or, rather, when – the currency union is under pressure, EU leaders might well think twice about erecting barriers between the Eurozone and its financial and banking capital.