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Birthday : 04/27/1955
Place of birth : Washington - USA
Linked companies : Alphabet Inc
Biography : Dr. Eric E. Schmidt is Executive Chairman at Alphabet, Inc., Founding Partner at Innovation Endeavor
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Banca Monte dei Paschi di Siena : Italy Rejects Renzi, Buoys Populists

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12/05/2016 | 05:15am CET

ROME-Italian voters on Sunday rejected constitutional changes backed by the government, prompting Prime Minister Matteo Renzi to announce his resignation and handing populists a victory in the heartland of Europe.

With virtually all the votes counted early Monday, 59.6% were "no," according to Italy's Interior Ministry, marking a stinging rebuke to Mr. Renzi's plan to overhaul Italy's legislature to make it easier to pass laws, including measures meant to make the country more competitive.

Mr. Renzi said he would go to Italian President Sergio Mattarella Monday afternoon to tender his resignation.

"I take full responsibility for the defeat," Mr. Renzi said in an address from Palazzo Chigi, the premier's residence. The Italian people "have spoken in a clear and unequivocal way....We leave with no regrets," he added.

The result means uncertainty in Italy, the European Union's fourth-largest economy, as the bloc struggles to revive growth and define its future. Mr. Renzi's resignation could clear the way for the formation of a caretaker government and, possibly, new parliamentary elections next year.

Among the biggest winners from Italy's vote is the antiestablishment 5 Star Movement, which campaigned against Mr. Renzi and his agenda, saying more radical change is needed. The party has called for a nonbinding referendum on Italy's euro membership. It also wants to abandon EU budget strictures and has said it might favor printing a parallel currency.

Public-opinion surveys indicate that roughly 30% of Italians would back 5 Star candidates 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-an outcome that could ultimately threaten the integrity of the eurozone and its common currency.

Giampaolo Brunelli, a 43-year-old supporter of the 5 Star Movement, voted against the reform Sunday morning. "Renzi hasn't done much to change this country-just like all the other politicians before him," he said after voting in Rome.

Europe is facing a prolonged period of political upheaval, with elections also slated for 2017 in Germany, France and the Netherlands, all countries where economic anxiety, opposition to the EU and a surge in migration have fed growing support for populist parties.

Such sentiments were also at play in Austria on Sunday, when center-left candidate Alexander Van der Bellen defeated Norbert Hofer in Austria's presidential race by 53.3% to 46.7%, according to a final count of votes case on Sunday and a projection of mail-in ballot results.

The vote ended Mr. Hofer's bid to become the first right-wing populist president in postwar Western Europe, but the election brought to light widespread discontent with the country's political establishment. Like the other populists across the continent, Mr. Hofer wanted to roll back the power of the European Union, toughen border controls, crack down on the flow of refugees and migrants to Europe and improve relations with Russian President Vladimir Putin.

Such pressures pose a major test for mainstream leaders coping with Britain's decision this year to leave the bloc and struggling to revive growth in the face of rigid labor markets, red tape and weak investment on the continent.

Investors will be watching developments in Italy closely as they assess the risks of an anti-euro shift and weigh the chances of contagion. Events in Italy could also influence decisions by the European Central Bank on how long it sticks with its easy-money policies. The euro fell about 1% after the referendum news broke, and stock markets in Asia fell early Monday as investors worried about the consequences of the "no" vote.

Capital has flowed out of Italy steadily for much of this year. In recent weeks, concerns have sent the gap between Italian and German 10-year government bonds to their highest level since 2014, while Italy's stock market has been among Europe's worst performers this year.

Italian banks have been especially hard hit, amid fears that Mr. Renzi's departure will delay or derail efforts to shore up the country's ailing financial institutions.

Government officials fear a selloff by investors on Monday could force a state bailout of troubled lender Banca Monte dei Paschi di Siena SpA in the coming weeks. That could undermine confidence in other banks in Italy and elsewhere in Europe.

Sunday's vote heralds an end-at least for now-to Mr. Renzi's ambitious plans to upend legacy parties and reinvigorate one of the worst-performing economies in Europe.

Mr. Renzi, 41 years old, stormed into office as Italy's youngest-ever premier in 2014, and pushed a series of market-oriented changes through parliament, including amendments to labor laws aimed at encouraging hiring.

He lifted spirits in a country angry at its elite and beaten down by a debt crisis and high unemployment. Mr. Renzi's broadsides against old-school politicians initially took some fire out of the 5 Star populist campaign, which had a strong showing in 2013 parliamentary elections.

Mr. Renzi's ascendance raised hopes among establishment EU leaders that Italy-a perpetual worry because of its large, moribund economy-would emerge from the doldrums.

"If I could vote in Italy, I would vote for" Mr. Renzi, German Finance Minister Wolfgang Schä uble said last week.

Italy's economy, however, has lagged behind. A nascent recovery in 2015 petered out in the first half of this year. Output remains below what it was before the 2008 global financial crisis. Joblessness has remained stubbornly high; more than 35% of young people are unemployed.

All of that has led to a surge in support for the 5 Star Movement and other populists.

Beppe Grillo, head of the 5 Star Movement, immediately called for snap elections following the referendum results.

"They may be the best for Italy right now," said William Barberi, a 43-year-old teacher in Turin who voted "no" on Sunday and said he may support the 5 Star Movement in the next elections. "A little turmoil can be a good thing."

However, Mr. Mattarella is more likely to opt for the formation of a caretaker government, possibly headed by Economy Minister Pier Carlo Padoan or Senate speaker Pietro Grasso. The new government would be charged with rewriting the country's electoral law and passing the annual budget.

Mr. Padoan, who has held top posts at the World Bank and the European Central Bank, could soothe market jitters. Mr. Grasso is a well-respected former anti-mafia magistrate who had a distinguished career fighting organized crime.

Major political parties are pushing to change an electoral law passed last year that gives extra parliament seats to a party winning 40% or more of the vote. The measure was intended to make for more stable governments.

But establishment politicians now worry it could help the 5 Star Movement gain power and want to changes the rules before any new national election. New legislation would tilt in favor of more proportional representation and make coalition governments more likely.

Write to Deborah Ball at deborah.ball@wsj.com and Giada Zampano at giada.zampano@wsj.com

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