Austerity or growth?

Italian Prime Minister Matteo Renzi’s Resignation Will Usher in a Period of Uncertainty

from The Wall Street Journal,

Premier is stepping down after voters rebuked him in a referendum on constitutional change

The 41-year-old is to formally inform Italian President Sergio Mattarella after announcing his decision in the early hours, following a stinging defeat in a popular referendum on a constitutional change he had heavily backed. Mr. Renzi met informally with Mr. Mattarella for about an hour on Monday, a person close to the situation said, without adding further details on their conversation. In the coming days, the president will undertake consultations with political parties to determine how to proceed. Mr. Mattarella is widely expected to opt for the formation of a caretaker government to deal with several urgent issues, including the passage of the 2017 budget and a banking crisis that threatens to boil over in the coming days. That government would ferry the country to new elections, which could be brought forward from their current timetable of spring 2018.

Mr. Renzi suffered a decisive rebuke on Sunday, with 59% of voters rejecting a constitutional change meant to overhaul Italy’s legislature to make lawmaking easier and encourage the creation of more stable governments. The proposal would have stripped the Senate of most of its powers and replaced its 315 directly elected members with 100 local officials. The Senate would also lose its power to hold votes of confidence on new governments, leaving that responsibility entirely to the lower house. Opposition to the reforms came from various quarters. Some argued the overhaul would endow the executive with too many powers. Others—particularly the populist parties that have seen their support rise in recent months—simply saw the vote as a chance to topple Mr. Renzi and push for snap elections. Public-opinion surveys indicate that roughly 30% of Italians would back candidates of the antiestablishment 5 Star Movement—which has called for a nonbinding referendum on membership in the euro—if parliamentary elections were held now. That puts it neck-and-neck with Mr. Renzi’s Democratic Party and means it will have an influential voice and could even end up in power. Mr. Mattarella’s consultations could move relatively quickly, possibly producing the name of a new premier by week’s end, which would be a welcome development given rising pressure on Italy’s banking system.

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