Italian political crisis looms after Renzi’s referendum defeat

Rome, Dec 5 (IANS/AKI) Italy on Monday faced political uncertainty after centre-Left Premier Matteo Renzi said he was stepping down following a referendum defeat on his plans to streamline Italy's political machinery.

Renzi said he would tender his resignation to Italian President Sergio Mattarella after 60 percent of Italian voters on Sunday rejected his proposed constitutional reforms to strengthen the central government and rein in parliament's upper house Senate and the regions.

"It wanted to eliminate the excessive seats of power....I failed and so I it's up to me to stand down, said Renzi.

"I lost, I say it out loud, albeit with a lump in my throat," said Renzi, who took office in February 2014.

With most ballots counted from the referendum, the No vote leads with 60 percent compared with 40 percent for Yes, with a 70 percent turnout.

Mattarella will now appoint a caretaker Prime Minister - possibly Finance Minister Pier Carlo Padoan - or call snap elections as the populist opposition Five Star movement and the anti-immigrant Northern League party are demanding.

The head of state may ask Renzi to stay on until the Parliament has passed the 2017 budget bill due later this month. Fresh elections are slated in 2018.

Markets showed no signs of panic on Monday as the possibility of the reformist Renzi's departure had already been factored in.

But there are concerns the political uncertainty could do deep damage to Italy's already fragile banking sector, where the failure of a major bank such as troubled Monte dei Paschi di Siena could set off a wider crisis.

Italy's ailing banking system remains vulnerable and the country's debt-to-GDP ratio, at 133 percent, is second only to Greece's.

Despite a weak recovery begun under Renzi's watch, Italy's economy - the eurozone's third largest - remains 12 percent smaller than when the financial crisis began in 2008.

The Five Star movement, which says it is getting ready to govern Italy, has called for a referendum on membership of the single currency.

The referendum result is being seen as a blow to the European Union, although its Economics Commissioner Pierre Moscovici claimed it was a domestic political issue and not a vote against the EU.

Northern League leader Matteo Salvini called the referendum a "victory of the people against the strong powers of three-quarters of the world".