Italians went to the polls on Sunday and yesterday to elect a new government after support from Mario Monti’s (unelected) technocrat administration was withdrawn by former PM Silvio Berlusconi’s party. The result, in the current economic situation, was the nightmare scenario that no party has emerged with a clear mandate, reviving fears of a Eurozone crisis and making investors nervous since the last thing they wish to see is uncertainty.
Per Luigi Bersani’s left of centre bloc seems to have taken control of the lower house, the Chamber of Deputies, with a wafer-thin majority: 29.54% vis 29.18% polled by Mr Berlusconi’s grouping. Bersani has won the national vote for the upper house, the Senate, but will not obtain the 158 seats needed for a majority – additional seats will be awarded in proportion to the regional vote and Mr Berlusconi’s bloc is likely to gain most from this. Mr Monti’s bloc polled about 10% of the vote.
The “joker in the deck” would seem to be the party of Mr Beppe Grillo, a comedian who headed up an anti-austerity party, the Five Star Movement, which garnered 1 in four votes during the election (25.55%), highlighting popular dissatisfaction with established politics. Given that their appeal was one of protest, it is as yet unclear as to the role and partnerships their newly elected parliamentarians will play with their more established (and despised) political colleagues.
European markets have lost ground as a result of the election with the FTSE down by 1.35% and the Cac40 down by 2.2% currently (Italy’s FTSE MIB in Milan fell by 4.7%) and the yield on Italian bonds has risen from 4.48 to 4.77% on Italian 10-year bonds. Major markets around the world have also dropped.
The Yen has risen strongly against the Euro and Dollar since the news broke, but has fallen back somewhat. The USA needs to come to a deal over spending cuts by the end of the month to avoid mandatory cuts which may harm the economy.
Time will tell if Italy can form a workable government from the cards dealt by the popular vote or if we will have to endure months of uncertainty before a second vote can be held (with no guarantee of a more stable outcome).
Italian Uncertainty Rattles Markets
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.