As Italians prepare to vote on a constitutional referendum on Sunday 4th of December, fearful investors are already dumping shares in Italian banks. This could lead to chaos in Rome and eventually to a financial crisis.
Monte dei Paschi di Siena, Italys oldest lender, saw its stocks going down steeply. Similarly, the countrys biggest banks are now also trading in the red.
Even more worringly, FTSE MIB, Italys top stock market went down by 1 percent today. Since the beginning of 2016, FTSE MIB has lost 20% of its value,
The downward effect has also rocked stock markets across Europe, as the markets appear to be worried that the Italian vote on the constitutional reform will negatively affect the Eurozones financial system in the immediate future. Both Germanys and Frances stock market were down by about 1.5 percent.
However, experts have warned that this could simply be a mere taste of what markets may experience in the aftermath of the referendum, if Italians decide to vote against the constitutional reform. Concerns are being expressed with regards to the Italian weak and fragile banking system, which currently holds around a third of the Eurozones total bad loans.
If Mr Renzi resignes as he has promised to do in case of a negative outcome of the referendum, the political uncertainty stemming for his decision could trigger yet another crisis of confidence among lenders. This could definitely result into the markets being hit hard by a shock in the aftermath of the referendum.
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