In what many had tipped as being a volatile outcome for the struggling Euro nation financial markets after an initial bout of volatility have taken in their stride Italy’s resounding “No” to constitutional reforms. With Italian Prime Minister Matteo Renzi putting his head on the line on the outcome it will mean Italy is due to elect their 6th Prime Minister in 10 years. The reforms were broadly looking to assist in preventing the stalemate which can often occur in Italian politics with the two levels of Government having the same powers.
The No vote was championed by populist party Five Star Movement (5SM) Francesco Oggiano, author of “Beppo Grillo Parlant” was quoted as saying “According to the 5SM, people won’t be able to choose their own representatives in the parliament and this is the most important point,” Oggiano explained. “The result (of a ‘yes’ victory) would be a parliament full of bureaucrats chosen from their parties that, once elected, will just get to satisfy their leader instead of people’s needs,” he added.
Whilst the Euro initially saw heavy selling the negativity was short lived, shortly after the vote EURUSD was down over 1.5% however by midday had recovered those losses, with equity markets following a similar pattern.
Shares in Banco Monte dei Paschi di Siena, regarded as Europe’s most troubled large bank, recovered to only mild losses by midday. Jeroen Dijsselbloem, Eurogroup President said “If this is the market reaction, it doesn’t seem to require any emergency steps,” in response to a question about whether the European Central Bank should intervene ahead of a eurogroup meeting in Brussels.
“The process of dealing with some of the banks that have problems need to continue and will continue,” he added. “[Italy] is a strong economy, is one of the largest economies in the eurozone, it’s a country with strong institutions.”