August 30, 2019

New government in Italy to soothe financial markets for the time being

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In Short

Barring last minute U-turns, a new coalition government formed by Five Star Movement and Partito Democratico is expected to take over soon. Concerns about snap elections erased for the time being.
New government in Italy to soothe financial markets for the time being
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Highlights:

  • Barring last minute U-turns, a new coalition government formed by Five Star Movement and Partito Democratico is expected to take over soon. Concerns about snap elections erased for the time being.
  • The durability of the new government is uncertain given the differences between the parties. However, the coalition is seen to win the vote of confidence next week and to take up work in September.
  • The new government will likely implement a slight fiscal expansion and steer a less euro-skeptical course. Work on the budget 2020 will be in the focus in the weeks to come.
  • Financial markets reacted with relief to the recent news flow. Although long-term issues remain, there is scope for a further decrease in BTP risk premium and an additional drop in yield levels.

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NEW GOVERNMENT IN ITALY TO SOOTHE FINANCIAL MARKETS FOR THE TIME BEING

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