Matteo Renzi steps down as prime minister after defeat in crucial Italian referendum

Telegraph

Matteo Renzi, the Italian prime minister, resigned late on Sunday night after losing a constitutional referendum.

He conceded before official results were announced as exit polls showed he was heading for a heavy defeat.

"My experience of government finishes here," Mr Renzi told a press conference after the No campaign won what he described as an "extraordinarily clear" victory in the referendum on which he had staked his future.

The outcome energised the anti-immigrant Northern League party, an ally of French far-right leader Marine Le Pen. The party called for an early general election in Italy.

Matteo Renzi 'Che Tempo Che Fa' TV show, Milan, Italy  Credit:  Lo Scalzo/AGF/REX/Shutterstock

The risk of political instability in Italy, Europe's fourth largest economy, led to stocks and the euro falling in early trading in Asia. The euro fell to a 20-month low against the dollar at $1.0505 in after opening at around $1.0685, but later pulled back up to $1.0562.

Who's next?

Matteo Renzi's resignation marks the start of a new period of uncertainty in Italian politics. It will be the job of Italian president Sergio Mattarella to decide what happens next. Here are some of his options.

Matteo Renzi with Sergio Mattarella Credit: Getty Images

Matteo Renzi 

Theoretically Mr Renzi could win a vote of confidence in Parliament, either with his current majority or with a new one including Silvio Berlusconi's centre-right Forza Italia.
But during a press conference early on Monday, Mr Renzi seemed to exclude this possibility. "My experience of government finishes here," he said.

Caretaker government

This is the most likely scenario. Mr Mattarella appoints a head of government with the support of the current majority or a new enlarged majority.
A number of names are already circulating including finance minister Pier Carlo Padoan and senate leader Pietro Grasso.

Italian minister of economy and finance Pier Carlo Padoan Credit: Getty Images

The caretaker government would be tasked with passing the 2017 budget in Parliament and modifying a new electoral law before elections take place.
He or she could also decide to continue until the end of the current parliamentary term in February 2018, a move that would likely prove unpopular with political groups such as Five Star, who are calling for elections as soon as possible.

Snap election

This is highly unlikely. A recent electoral reform was designed to ensure the leading party has a parliamentary majority in the Chamber of Deputies, while the failure of the constitutional reform of the senate means it still maintains a proportional system, making the two chambers irreconcilable and a parliamentary majority almost impossible.
The populist Five Star movement, whose founder and leader Beppe Grillo has called for an election "within a week", believes the electoral law could be modified in the senate if necessary to align it more closely with that of the Chamber of Deputies.
But most other political parties, who have a majority in Parliament, disagree, precisely to avoid a victory of the populist party. They are instead advocating reform of the electoral law.
In the end it will be for Mattarella to decide Italy's immediate future and to ensure there is a majority in favour of forming a technocratic government if he wants to avoid, as many analysts believe, early elections next year.