According to most polls, Italy is heading towards a hung parliament on March 4.
The prospect of a hung parliament is already affecting Italy’s sovereign debt profile in the country with the second biggest debt-to-GDP ratio in the Eurozone (130%) after Greece. 10-year bond yields surged over 2% in the last week of December, for the first time since October 2017.
The anti-establishment 5-Star Movement (MS5) made a strategic U-turn on Tuesday, suggesting it would be willing to form an alliance. MS5 is leading the polls (28-29%) but with no apparent political ally. Its 31-year old leader Luigi di Maio is promising a referendum on Euro membership. He is also promising an income support package to target poverty.
The ruling centre-left fairs just under 23%. Its electorate base has been fragment with the emergence of the left-of-centre Free and Equal (LeU: 7%). The leader of the centre-left PD and former Prime Minister, Matteo Renzi, has proposed an end to the fiscal compact, allowing Italy to invest €10bn a year.
Silvio Berlusconi’s Forza Italia (16%) aspires to play the role of a king-maker, as the former prime minister leads a coalition with Lega Nord (13%) and the populist Brothers of Italy (Fdl, 5%). Berlusconi is proposing a parallel to the Euro currency, while his far-right allies focus on a vehemently xenophobic message against a so-called “invasion” of Italy.