Markets “Have No Reason to Fear” Right-Leaning Coalition in Italy

Rome - Italy
Markets “Have No Reason to Fear” Right-Leaning Coalition in Italy

As Euroscepticism is gaining pace, investors are watching, uncertain of how the markets will respond to possible EU-unfriendly coalition government in Italy

Sunday’s elections in Italy resulted in a hung parliament and the prospect of Italy being ruled by a government made up of two non-mainstream EU-unfriendly political parties is becoming quite real.

The uncertainty over the coming coalition talks immediately affected the market: while the major European equity markets all went up, Italy’s main stock index fell 0.9%.

Investors unnerved by unpredictability of the possible government sell out the bonds, raising the country’s borrowing costs.

Indeed, the probability of the alliance between the Eurosceptic, populist Five Star Movement which secured a third of the vote, and the right-wing, anti-immigrant League party is a big blow to Brussels.

“Theoretically possible for the EU’s nightmare result to come true: a coalition between the ‘populist Eurosceptics’: Five Star and The League.”

BBC’s Europe Editor Katya Adler

The coalition between the League Party and Five Star Movement will take a confrontational stance against the European Union, especially on immigration and austerity.

At the same time as a result of Germany’s coalition government Angela Merkel and her party is not such a strong unity as they had been before, and French President will have a lesser support both from Germany and Italy on his mission to unite and strengthen the EU even further.

Markets are usually weary of any uncertainty, and the investors will be watching the events closely giving little trust to Matteo Salvini, the head the League, who said on Monday that his party has a right and duty to govern and the markets should have no reason to fear.

Read the full story in CBC