Italian spreads surge as elections come with political risk

ARNE DEDERT

Italian spreads surge as elections come with political risk


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Italy is heading towards national elections on March 4, with markets looking nervously at the political risk hanging over the country’s public debt.

With 130% of debt-to-GDP ratio, the Eurozone’s third economy presents a major challenge. Italian bond yields jumped by 10 bps to 2.09% this Friday, 23rd of February.

One fear is the surge of Lega Nord, advocating an exit from the Eurozone, a policy commitment that the 5-Star Movement has abandoned. The other fear is a hung parliament.

The Italian economy has returned to growth, the Italian deficit is under control, and the labour market is rebounding. But, as the Eurozone’s economy is booming and the European Central Bank is preparing to review its quantitative easing programme,

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