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The Italians have voted on a pivotal constitutional referendum which has resulted in an overwhelming vote of No. What is certainly shaping into a global political trend, voters rejected the continuation of the status quo and once again supported anti-establishment ideals. While the details of the political implications of the referendum are important, the interest from the global community is more focused on the financial implications to its economy due to the precarious developments from this past summer.

Stress tests performed in July resulted in the oldest and third largest bank in Italy, Monte de Paschi, showing abnormally high nonperforming loans on their balance sheet. The state of the bank was given a no confidence vote by the examiners. The EU as well as the marketplace have pushed for bail-outs, bail-ins, or some mechanism for restructuring to keep the bank solvent. The concern is that the third largest bank in the third largest economy in the European Union could have serious negative effects on the EU’s partners and the global banking system as a whole.

It is believed that the referendum will make it more difficult for the government and the EU to implement mechanisms to recapitalize the flailing bank. Also, the presiding thought process goes, Greece’s financial woes were but a blip on the global financial radar compared to the size and scope of the Italian economy and that the reverberations from the Greek banking crisis almost plunged the world into another financial catastrophe.

However, as it stands now, Matteo Renzi will resign as he promised prior to the referendum vote and the leading political groups that helped fuel the ‘No” vote are pressing for new elections in order to secure more influence and power within the fractured Italian government. Only time will tell whether these new groups can tilt the political favor towards their ideals of Anti-EU involvement and Anti-Bank Bailout.

Included in this update is a link to the video of Matteo Renzi’s resignation speech. Follow the links and the instructions on turning on the closed captioning in English. Also, find the article from La Repubblica that was translated into English using Google Translate. Please excuse any grammatical errors due to the imperfect translation process.

Referendum, the foreign press: “Now threatens all of Europe”

The day after the victory of the “No”, the foreign newspapers are very concerned about the Italian banks and the risk of financial contagion across the eurozone. According to the Telegraph, Italy may soon leave the single currency. No shortage of criticism of Renzi (“its a gamble”). But needless to Grillo and Salvini.


Article was translated using Google Translate. Original article in Italian can be found by clicking here.

ROME – “Hello Beautiful”. Haaretz jokes so on Renzi defeat in the referendum on constitutional reform. But it is a joke that did not last long. According to the liberal Israeli newspaper, the praise of democracy made by the premier at a press conference last night, immediately after the apparent defeat, something is wrong. “The two main leaders of European center-left, Renzi and Hollande have already said goodbye. And meanwhile the wave of populism that is coming down on Europe is getting bigger.” According to Pablo Simon, a political scientist and columnist of the Spanish Pais, the problem is not just populism: “In Europe grows the extreme right, that soon could destroy the achievements of an entire generation.”

The economic and financial risks. But there is another problem after the referendum that scares the international press. And is the economic and financial matters Italy and, consequently, the whole of Europe, despite the lukewarm morning markets have reacted to the resignation of Renzi, as a note rather astonished the Figaro. The Wall Street Journal and the Financial Times devoted many articles to the Italian case. And, for the major financial newspapers of the world, there is to be pessimistic. According to the Financial Times, that shortly before the referendum had warned all on systemic risks at least eight Italian banks, now the no triggers at least two very serious complications. The first: the rescue of Monte dei Paschi. According to British newspaper, the victory of the “No” will jeopardize the institution’s recapitalization plan, as well as making problematic the situation of others. The second: Italy now represents a huge risk to eurozone stability. Because the flaws of the banking system, writes the famous columnist Gideon Rachman, they could now trigger financial contagion, evoking the difficult times of 2013, with the crazy spread and a strong financial instability.

Contagion in the eurozone and outside Italy? The Wall Street Journal is less drastic, but still worried: according to the American newspaper, the Italian government bonds now may not be at all in a peaceful situation. And the problems could spread to the entire euro zone. For the Times of London, because of Italy, the whole of Europe is already in turmoil. And many other observers, such as the Spectator, are many who feel challenged by what will be the future of the euro “is being born the first anti-single currency government in Italy,” writes the British weekly. The Daily Telegraph, conservative tested and decidamente anti-Brexit, speaks explicitly of “Quitaly”, ie an Italy out of the euro: “It ‘s just a matter of time.” The EU, writes Der Spiegel, just hopes that Italy has now some experience in recent years to face the future.

The criticism against Renzi. There are, of course, also strong criticism of the president of the outgoing Council, especially for his chance in the fight for everything with a constitutional referendum. The Pais literally speaks of “a worsted (ie a” Scoppola “, ed) for Matteo Renzi”: vanity and the ambiguity of the referendum have been the cause of its demise. Very hard also the German newspaper Sueddeutsche Zeitung, “The Fiasco of Renzi”: Italian Prime Minister wanted to play with the referendum, but so has endangered an entire country.

The criticism against the parties of No. But there are also negative judgments even by opponents Renzi and his constitutional reform. For the Guardian, the victory of the referendum will not bring Grillo and Salvini anywhere, because 60 percent do not automatically turn into votes for them. Germany’s Frankfurter Zeitung Allgeimeine also is very critical with the anti-Renzi: “Do not think of the future of Italy.” The New York Times reports instead worried Salvini praising Putin (and Le Pen), while the Washington Post headline “The Italian premier resigns in a populist revolt.” But for Thomas Schmid, editor of Welt and historical adviser to former German Chancellor Helmut Kohl, the problem is broader: “The West should reform the democracy,” because it fails to respond to citizens’ needs and does not work.

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