Will Italy set off the next crisis in the eurozone?

The long-term political and financial consequences of Italian prime minister Matteo Renzi’s referendum defeat and subsequent resignation are difficult to anticipate.

Italian Prime Minister Matteo Renzi's resounding referendum defeat on Sunday and his subsequent resignation have not caused much market turmoil in the short term. But over the long term, the political and financial consequences are difficult to anticipate. Italy need not pitch into chaos because of this result, says Neil Unmack of BreakingViews.com, "but the odds are now on a year of political uncertainty, few reforms and weak growth".

For a start, there's the precarious state of Italian banks, which have some of the weakest capital levels in the global financial system and are tottering under a pile of bad loans totalling more than €350bn. Renzi's defeat has left them in a very uncertain position. "Without a stable political foundation, investors will lose faith in buying Italian banks' shares and bonds rattling the domestic economy and the eurozone," says Patrick Jenkins in the Financial Times.

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Giselle Garcia is a Brazilian journalist currently studying for a master's degree in financial journalism at City University in London. Her focus is on international politics and markets.