The result of Sunday’s referendum in Italy is so crucial it just leaves no time to analyse the result, not even to speculate on what will happen – election?

The banking system in Italy is on its knees, some in an even worse position than others.

It is not clear how the banking sector can get out of its problems. There is an overhang of huge debts and mountains of loans that cannot be paid back. Banks that were reputable as serious banks have seen their share price hit the floor – Monte dei Paschi di Siena has seen its share price decrease by an astounding 85%.

This situation feeds upon itself. The banks cannot stimulate the economy. Since the economy has seen only a very weak growth, the banks cannot generate growth that enables them to pull back from the brink.

The problem is that until just a few months ago, the Italian State, had it been so minded, could save the banks. But now, thanks to the changes that have been introduced as part of the Banking Union, the State cannot do that, cannot put money in the banks. If it does that, it will be infringing the laws of the EU.

Furthermore, the new EU law states that if a bank fails, it must not be bailed out by the State but by its shareholders and investors. And those shareholders and investors are nothing else but voters. If the bank is hit, the pain must be shared between the shareholders and the investors.

The problem in Italy now as a result of Sunday’s referendum is that there is no government, and the discussions that lead to a new prime minister still have to begin. Then there will be consultations, and eventually maybe an election will have to be called.

All this means a vacuum of power, which is bad at any time, but especially in this crucial time for the banks, when decisions must be taken and there is no one ready to take them.

Renzi’s mistake was that he went for a constitutional change instead of focusing on getting the economy to grow. As a result of his defeat he has now left the country without a government at a crucial time.

This result may have incalculable effects on Italy but it may also spark a knock-on effect on other banking systems in Europe and hence on the economies of other countries. In particular, for example, the situation with regard to MPS and other ailing Italian banks can have an effect on Deutsche Bank, the greatest of German banks which is also passing through difficult times.

It is not clear what can be done to help the ailing banks: should they be nationalized, or closed down or amalgamated? The rules of the Banking Union are very stringent and allow of no exception but there is one premise on which they can be built and that is a functional, effective, government. We are now entering in uncharted waters in Italy – to see what happens under the new rules in the absence of a government. We hope we may see the banks saved, but we very much fear we may see a collapse, great or small as it may be.