(Bloomberg) -- Prime Minister Matteo Renzi was asked by the head of state to put his resignation on hold until next year’s budget has been approved by parliament, as Italy sought to minimize the political instability triggered by his stinging defeat in a constitutional referendum.
Renzi, 41, met with President Sergio Mattarella on Monday evening and offered to step down, Mattarella’s office said in a statement. Instead, he was asked to hold off, a move that gives the president time to work out how to form a new government -- Italy’s 64th since World War II -- and the Senate time to give final approval to the budget as early as Friday.
Like David Cameron over Brexit, Renzi had staked his political future on a plebiscite and fell victim to an anti-establishment revolt. Renzi was forced to step down after Italians voted overwhelmingly against his flagship reform to cut the power of the Senate, seizing on the chance to boot him out of office.
Mattarella will have to determine who can form a temporary government that will likely have to pass an electoral reform before elections can be held. The current electoral system could benefit the anti-euro Five Star Movement because the biggest party automatically gets a majority. Five Star wants elections to go ahead as soon as possible.
Polls suggest Five Star, clamoring for a referendum on Italy’s euro membership, would win an early election, though a poll last month showed that 67 percent of Italians want to remain in the single currency all the same.
Finance Minister Pier Carlo Padoan is a potential candidate for premier along with Transport Minister Graziano Delrio, Culture Minister Dario Franceschini and Senate Speaker Pietro Grasso. Padoan would be a familiar figure for financial markets, which reversed an initial sell-off on the referendum result as investors came to terms with Renzi’s impending departure.
Much of the attention remains focused on Banca Monte dei Paschi di Siena SpA, which is in the middle of a 5 billion-euro ($5.3 billion) capital raising and is vulnerable to government instability. Its stock fell 4.2 percent on Monday.
Renzi’s resignation also halts his reform plans. For the near future, he had pledged tax cuts, more state investment, and steps to tackle corruption and make the state sector more efficient before the referendum campaign came to monopolize his attention.