Insight: Rome will burn, regardless of Italian election result

Wed Feb 20, 2013 11:57am EST
 

By Michael Stott

ROME (Reuters) - Regardless of who wins next weekend's parliamentary election, Italy's long economic decline is likely to continue because the next government won't be strong enough to pursue the tough reforms needed to make its economy competitive again.

Bankers, diplomats and industrialists in Rome and Milan despair at how Italians are shifting allegiances ahead of the February 24-25 vote to favor anti-establishment upstarts and show disgust with the established parties.

That makes it more likely that no bloc will have the political strength to tackle Italy's deep-rooted economic crisis, which has made it Europe's most sluggish large economy for the past two decades.

Final opinion polls predict that the vote will deliver a working majority in both houses for a centre-left coalition governing in alliance with technocrat former prime minister Mario Monti. Political risk consultancy Eurasia assigns this scenario a 50-60 percent probability.

But Italy's election for both chambers of parliament has the potential to tip the euro zone back into instability if the outcome does not produce that result.

The colorful cast of candidates includes disgraced media tycoon Silvio Berlusconi, one of the world's richest men, the bespectacled academic Monti, anti-establishment comedian Beppe Grillo who campaigns from a camper van, and Nichi Vendola, a former communist poet who is the governor of Puglia.

Investors have so far taken a relaxed view, relying on polls produced until the legal deadline for surveys of Feb 10.

One of the best indicators that they are not worried: Italian benchmark 10-year bond yields, which topped six percent during the country's worst political moments in 2011, are now trading around 4.4 percent, almost a full percentage point lower than those of Spain.   Continued...

 
Five-Star Movement leader and comedian Beppe Grillo gestures during a rally in Turin in this February 16, 2013 file photo. ITALY-ELECTION/ REUTERS/Giorgio Perottino/Files