Italy: Political drama drags on – Danske Bank

The Italian political drama drags on and although market sentiment recovered somewhat from the sell-off on Tuesday, the political outlook remains unclear, following conflicting comments from Five Star and League politicians yesterday, notes the research team at Danske Bank.

Key Quotes

“The option for a technocratic government seems to be on hold for now, after PM-designate Cottarelli is awaiting the possibility of a political government between Five Star/League/Forza Italia and other political parties emerging. A renewed Five Star/League push to form a government remains an option, but both parties have also repeated their call for new elections, raising the threshold for a compromise on any deal. We expect the Italy theme to stay with us in the next weeks and months and market sentiment to remain very volatile in the near term.”