Bad news for markets as pollsters call it right for once in Italian referendum
London — For once, the pollsters were right, and it is bad news for financial markets. Italians have rejected Prime Minister Matteo Renzi’s make-or-break constitutional reform, and the 41-year-old leader is on his way out. The prospect of political instability in the eurozone’s third-largest economy has negatively affected the euro and threatens to deal a serious blow to shares of struggling Italian banks such as Banca Monte dei Paschi di Siena, which is scrambling to draw a line under a pile of bad loans and raise capital from private investors at the same time. Yet as unwelcome as the result may be, it does not have to be fatal for efforts to clean up Italy’s ailing banking industry. The urgent problem facing the Italian authorities right now is Monte Paschi, which is part-way through its complex plan to raise €5bn of new equity, almost 10 times the bank’s own market capitalisation, before the end of December. A debt-to-equity swap has helped bring in about €1bn; the bank still ne...
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