Italy: Politics in the limelight – Danske Bank

Danske Bank analysts note that in Italy, the coherence of the governing coalition of League/Five Star went from bad to worse yesterday evening, as Salvini followed up on recent days' comments and called for a parliamentary vote of confidence, which, if resulting in Prime Minister Giuseppe Conte losing the ballot, could lead to swift elections to be held already in October.

Key Quotes

“Based on opinion polls, Salvini and the League would be set for almost 40% of the popular vote, whereas the Five Star movement has plummeted in polls to just above 15% down from 32% at the general elections in March 2018. However, Salvini cannot himself summon the parliament, which is currently in recess, and even if Conte loses the ballot, it will be the president deciding whether new general elections will be held, or instead trying to arrange for an alternative governing coalition.”

“Salvini's comments put BTPs under pressure already yesterday and we expect more of the same today, even though the Salvini announcement actually removes uncertainty from the market.”