Italy’s Political Crisis causes stock slid

The widening political crisis in Italy sent stock prices falling around the world Tuesday, with the Dow Jones industrial average losing 1.8 percent of its value.

European bank stocks were among the hardest hit, with Italy’s Unicredit and Spain’s Santander down by more than 5 percent, but U.S. banks were also hit.

As stocks plunged, investors poured money into safe havens. U.S. Treasury yields saw their biggest one-day drop in two years and the dollar gained ground against the euro.

The sell-off came after Italian President Sergio Mattarella vetoed the choice of a finance minister who has sometimes been critical of Italy’s membership in the eurozone.

The president’s move stymied efforts by two populist political parties to form a government and made it more likely that elections will have to be held in coming months.

Although the two parties say they are not considering a departure from the eurozone, the mere suggestion of such a move has scared investors. The country represents the third-largest economy in the eurozone and also has substantial debt, much of it held by foreign banks.