The emergence of an anti-establishment government in Italy has finally raised also market worries and while Italy is not on its way out of the euro, there are good reasons to be worried. Italian assets have more room to suffer, according to analysts at Nordea Markets.
“While the most recent version of the government programme does not include any questioning of Italy’s Euro-area membership, the government’s stance could easily change, when it becomes clear that their demands will not be met in on the EU / Euro-area level.”
“In a scenario of renewed market pressure and no further support from the ECB – which will be very unlikely to support a country with uncooperative government – euro exit plans could quickly come back to the table again.”
“Further, the pro-euro President Mattarella could block the government, if it found it too extreme, which also favours the two parties to keep their most extreme options under the table for now.”
“In any case, it is very doubtful that the Italians would want to leave the euro. The topic did not feature in the election campaign, so euro-scepticism was not the prime reason people voted for M5S and LN. Even if the Italians are among the most euro-sceptic countries, a clear majority still supports the single currency.”
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