Italy: Mi Scusi, But What Do We Do Now?

Italy caught the “post-election confusion” bug this week as the country spent most of Monday trying to figure out what on Earth should they do now that they voted against the constitutional referendum. Prime Minister Matteo Renzi, who had promised to resign Sunday night, offered to stay on for a few days until Italy got its budget together so as to avoid a financial crisis or political turmoil and give everyone time to digest the news. It’s not like a departing Prime Minister is really “news” for Italy though. The country has seen “63 governments in the last 70 years,” an embarrassing fact that Renzi’s referendum was supposed to change. Renzi’s departure puts the bailout of a small Italian Bank, the Monte dei Paschi, at risk, holding up a key 1 billion euro investment from Qatar. If this relatively tiny bailout (AIG got more than $160 billion) fails to materialize, it could set off a series of events that brings down the Italian and European Banking systems, which are hardly in good shape anyway. The government is planning a state bailout to avoid that outcome. Just when you thought bailouts were no longer en mode…