An ailing banking sector is Italy's Achilles' - Rabobank

Analysts at Rabobank noted that the Italians have rejected a constitutional reform that would have improved the governability of their country.

Key Quotes:

"Renzi has resigned and a caretaker government will likely be put in place to reform the electoral law. Early elections will follow, probably between mid-2017 and early 2018.

The initial market impact has been fairly muted, while it is just another blow for the economy. We expect economic growth to decelerate from 0.8% in 2016 to 0.6% in 2017.

We continue to see the ailing banking sector as Italy’s Achilles’ heel.

The odds of a referendum on Eurozone membership haven’t increased after yesterday’s vote. If anything, the chance of a referendum has only declined."