Shares in Italian banks have continued to tumble ahead of Sunday's referendum. Markets are becoming increasingly worried that voters will reject Prime Minister Renzi’s constitutional reforms and force his resignation. The constitutional changes are designed to reduce the power of the senate and transfer power away from the regions.
Capital is already fleeing financial institutions, raising concerns over the solvency of the Italian banking sector. Shares in Italy’s largest lender Monte dei Passchi fell 12% before trading was suspended.
Anti-European feeling is on the rise and many believe that the Italians will vote ‘no’ solely to topple the pro-EU leader. The latest polls indicate Renzi is trailing Beppe Grillo, a comedian turned political leader, by 5%.
Should the ‘no’ vote prevail on Sunday, confidence will be lost in the Italian government’s ability to structure an already distressed banking sector.