Italian election 2018: What will Italy general election mean for Eurozone and euro?

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The economy is likely to be the biggest influencer over Sunday’s , with Silvio Berlusconi back in the spotlight as he leads the centre-right coalition in battle against the Five Star Movement’s Luigi Di Maio and the Democratic Party’s (PD) Matteo Renzi.

Italian public debt has risen from an already high 100 percent of GDP at the end of 2007 to more than 130 percent, with only Greece facing a more dire economic situation in Europe. 

And bad loans from businesses hurt by the ailing economy have built up in the banking system after companies were unable to service them - making the pile of non-performing loans the biggest of any country in Europe.

The bad loan stack is now so vast it amount to almost a quarter of the total in the EU.

What will Italy general election mean for Eurozone and euro?

The most likely scenario after the elections on Sunday is that no single party will reach a majority. 

Mike Ingram, Chief Market Strategist at WHIreland, told that

He said: “The Italian economy is eight times larger and a signatory to the Treaty of Rome, so impact on the European economy may be felt much more strongly.

“Although a distant prospect right now, Italy is a potential Euro Killer.”

Italian election 2018: Matteo Salvini

AFPItalian election 2018: Matteo Salvini leads what was formerly known as Lega Nord

Italian election 2018: Matteo SalviniAFP

Italian election 2018: Matteo Salvini could form the government's coalition

Italian election 2018: Luigi Di MaioREUTERS

Italian election 2018: Populist M5S leader Luigi Di Maio could also prove a risk to the Euro

Foreign Exchange analysts predict if either Five Star Movement (M5S) or Lega are involved in forming a government, confidence could plummet and the Euro could fall as low as £0.87p ($1.20).

However, many of Italy’s problems concern its stuttering economy and therefore the markets are now looking across at larger political rumblings with greater interest.

Mr Ingram said: “Until very recently it appeared markets had become totally desensitised to political risk. 

“From Brexit through to the Trump Presidency, markets have tended to shrug off unexpected and potentially disruptive political developments, if not actively spin them positively.”

The expert adds Italy started to reverse its chronic underperformance versus the rest of Europe when then-prime minister Matteo Renzi resigned after failing to enact constitutional reform.