uscita-wlochy-exit-300x199Referendum in Italy overshadowed the lack of change in the rating of Poland, although the decision by S & P appeared on Friday late afternoon. For markets more important, however, was Sunday’s referendum in Italy, which appeared in a total flop of Renzi’s government and caused clear, though not rapid changes in the markets.


On Sunday was held a referendum in Italy on changes in the constitution that would give chance for greater political stability by reducing the power of the Senate and easier and faster implementing of reforms. The changes proposed by Matteo Renzi did not meet with approval from the Italians. Voter turnout was nearly 65%, which indicates a considerable motivation of residents who decided to vote against the proposed changes. Vote “no” was nearly 60%, while the “yes” was about 40%. So clear loosing predicted none of pre-election polls and again was realized a worst-case scenario on the market due to Renzi announcement.

Renzi in his speech after the first partial results said that he takes full responsibility for the rejection of the amendments by the Italians. It is for him a clear signal of lack of willingness to changes, so that his mission is now probably over.  Renzi indicated that will make today his resignation to the president Sergio Matterelli. This is obviously the worst scenario for markets so at the opening we observed considerable volatility. Euro was heavily sold off and in relation to the US dollar was the cheapest from 20 months falling below local lows from November last year. At the opening gold was more expensive, but really referendum does not translate into increase in risk in world financial instability so that growth was quickly neutralized.

Before the Italians are few scenarios. The first of these may be the continuation of Renzi’s mission with new government in the absence of acceptance of the resignation of Renzi, although this scenario seems unlikely. Another is continuation of current government with a new prime minister and new government. The most likely candidate would certainly be present Finance Minister Pier Carlo Padoan, who would calm down market participants. In last year passed a law that gives additional seats in parliament for the party that receives 40% of the votes in order to stabilize the governments, this situation could lead, in case of earlier election that authority could take the populist party Five Stars Movement, so the major parties probably will unite in aim to change the electoral law before possible elections.

After all, the events in Italy should not have a big bearing on the markets and all the movements are rather short-lived. Surprising decision was  taken by rating agency S & P in relation to the Polish debt by changing its outlook from negative to stable, despite the implementation of a number of risks. According to the agency disappeared the risk of a short-term deterioration of the state of law in Poland, but also the budgetary situation does not deteriorate. This information is very good for PLN (zloty), which was heavily sold off last week, but until now we  cannot see much  relief in case of our currency, which was losing also today.

Michael Stajniak, XTB

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