Jan von Gerich, analyst at Nordea Markets, suggests that the Italian political risks are very real, and heightened uncertainty is set to burden the overall economic outlook further and hit Italian bonds.
Key Quotes
“The situation is likely to get worse before getting better. Early elections may be ahead.
- There are genuine reasons to be worried about the Italian outlook
- Higher political uncertainty looks inevitable, and it will probably take considerable market pressure for Matteo Salvini to moderate his stance
- Italian bond yields face further upward pressure
- Even harder clashes with other EU countries ahead, even if near-term fines look unlikely
- Parallel currency proposals back on the table
- The prospect of Prime Minister Salvini is a scary thought for financial markets
- The absence of growth may only support Salvini’s popularity.”
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