Italy's Foreign Minister Paolo Gentiloni set to replace Matteo Renzi

Former foreign minister Paolo Gentiloni is set to replace Matteo Renzi as Italy’s new PM. Following reformist leader Matteo Renzi's resignation in the wake of a crushing referendum defeat, President Mattarella on Sunday invited Former foreign minister Paolo Gentiloni to form a new government, which Mr Gentiloni accepted in a brief statement.

It was a rather quick decision to fill the void after the European Central Bank on Friday rejected a request from Monte dei Paschi di Siena, the country’s third-largest bank, for extra time to raise capital among private investors.

The ECB’s decision raised chances that the Italian government may have to use state funds to rescue one of its most prized financial institutions, which has been dogged by non-performing loans. Mid-sized Popolare di Vicenza and Veneto Banca are also in the midst of a crisis and need as much as €3.5bn in additional capital to keep afloat.

Next election in Italy is scheduled by February 2018. The opposition sees Gentiloni as a puppet premier keeping the seat warm for his close ally Renzi, who is planning a comeback at the next election. Five Star, Italy's biggest opposition party, and the far-right Northern League are demanding a vote as soon as possible.

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