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Analysts at Nomura say it feels like it’s time to dust off the euro-area crisis playbook from the 2010-12 period.

Key Quotes:

“However, there are a number of key differences this time – on the positive side, imbalances within the euro area have reduced substantially (Italy now runs a current account surplus) and mechanisms are in place to limit contagion risk. However, the political backdrop is more challenging with the rise of anti-establishment parties across the western world.”

“Euro break-up fears are clearly re-emerging – this week we saw Italian spreads widen to levels not seen since 2013. Despite the retracement over the last 24 hours, spreads remain at elevated levels.”

“As flagged in Italian drama – a 5 star review, Italy concerns are unlikely to dissipate soon. We expect spreads to remain wide for some time ahead. We now expect a slower pace of normalisation from the ECB (with hikes coming in September 2019) and have closed out of our long euro positions against USD and CHF, with euro crosses highly sensitive to Italy risks for now.”