| Extraordinary election result in Italy Feb 26th 2013, 14:34 http://www.bbc.co.uk/news/world-europe-21586340 Quote:
The words "Italy ungovernable" appear in large black letters on the front of one of the country's bigger newspapers.
The headline pretty much sums up the mood in the aftermath of this inconclusive election.
To govern Italy you need a working majority in both houses of parliament.
And it looks unlikely that any faction will be able to build one in the Senate.
It is very hard to see any stable government emerging.
"What we have seen materialise is what the international observers and markets consider the worst of nightmares," said a columnist in the Repubblica newspaper.
"To create a government in these conditions is impossible."
The centre-left Democratic Party has fallen badly short of the commanding position that seemed well within its grasp at the start of the campaign.
It was torpedoed by extraordinary performances from two of its rivals.
Former Prime Minister Silvio Berlusconi was almost written off as the campaigning began.
He had been forced from power not much more than a year earlier with Italy's finances in ruins around him.
He was mired in scandal and his party was in disarray. He seemed a spent force.
But Mr Berlusconi presented himself as the anti-austerity candidate. He came talking not only of tax cuts, but of actually handing back some tax already paid...
...But this election will always be remembered for the stunning performance of the new citizens' protest network - the Five Star Movement.
Led by its guiding star, the comedian-turned politician Beppe Grillo, it was born and bred on the internet.
But it emerged from the web and took its argument into town squares all over Italy.
The citizen activists oppose what they regard as the corrupted, self-serving traditional parties - the entire failed political establishment.
The movement has connected with huge numbers of Italians who have developed a contempt for the governing elite.
It won a quarter of the vote. It has become the largest single faction in parliament and a major political force in this country.
It is an astonishing result that will resonate across Europe.
| Comments: http://www.spiegel.de/international/...-a-885616.html The Italian election, in which more than half of voters backed two comedians in the form of Silvio Berlusconi and Beppe Grillo, shows Italians are unable or unwilling to grasp the depth of their economic plight, argue German media commentators. The ungovernable nation poses a major risk to the euro zone... ...Predictably, Italian share prices fell and government bond yields rose on Tuesday. The euro fell as far as $1.3042, its lowest since Jan. 10. Investors around Europe and worldwide have been spooked by the election outcome, which has the potential to reignite the euro crisis... ...Any coalition government must have a working majority in both houses to be able to pass legislation. German media commentators note on Tuesday that more than half of Italian voters backed two populists -- Berlusconi and comedian Beppe Grillo with his anti-establishment Five-Star Movement -- who told people what they wanted to hear, rather than the simple truth that Italy will have to keep on tightening its belt and reform its economy to maintain investor confidence and be able to cope with its burgeoning public debt. Grillo's party won the most votes of any single party, with 25 percent of ballots cast. He wants Italy to hold a referendum on remaining in the euro. He also wants cuts in politicians' privileges, a minimum income for the unemployed, clean energy and free Internet access... ..."Two comedians stood in the election campaign and were rewarded for their defamatory shouting: Silvio Berlusconi and Beppe Grillo. How could that happen? Because the serious politics in the form of technocrat Prime Minister Mario Monti and the center-left candidate Pier Luigi Bersani hesitated, hummed and hawed and resorted to half-measures." "Without Monti's pledge of a return to seriousness, Italy as a euro nation wouldn't exist anymore today. But this blunt message hasn't reached Italy. No, it wasn't the austerity-obsessed Germans who forced Italy to tighten its belt. It was the circumstances, the markets, it was the political and economic conditions in the country itself that left Monti with no other option than to tackle reforms and reduce the ludicrously high debt levels." "Now populism, yelling and lies rule Italy once more. In the Greek election dramas of recent years it was the radicals who profited from the crisis. In Italy it has been the populists. They're radical too in their ways: They deny reality, they pass blame for the misery to enemies outside the country, they witter on about the simple solution to all the problems. Italy won't get a simple solution after this election. It will get a new election at most. And that wouldn't be a blessing either." http://www.economist.com/blogs/charl...ian-politics-2 Quote:
The former prime minister promised not only to abolish, but give back the revenue from an unpopular tax on primary residences imposed last year by Mario Monti's outgoing "technocratic" government. Mr Berlusconi has claimed, improbably, that he can offset the impact on Italy's public finances with the proceeds of a deal with Switzerland on cash stashed away there by Italians. It is precisely the kind of fast-and-loose approach to the government's accounts that explains why investors are so wary of Mr Berlusconi and alarmed to see him climb back out of what had seemed like his political grave.
There are several ways of looking at this mess. All contain an element of truth. The most generous is to see the huge vote for the M5S as encouraging: a sign that many Italians, and particularly younger ones, have had enough of the sleaze, cronyism and sheer immobility of Italy's aged political class. The people who belong to Mr Grillo's movement are idealists. The M5S refuses to accept public money. Its elected representatives agree to take only part of the salaries to which they are entitled and stand down after two terms. The movement espouses many good things, along with others that are impractical and some that are troubling (such as its opposition to the easing of citizenship requirements for the Italian-born children of immigrants).
Another way to interpret what has happened is as an example of Mr Berlusconi's thoroughly malign effect on Italian public life. The reason parliament has emerged deadlocked from this election is because of the absurd electoral law his government introduced in 2005 as a way of minimising its defeat in the election of the following year.
| http://www.guardian.co.uk/world/2013...ult-euro-fears Quote:
Former Berlusconi supporters who had been toying with abstention seem to have been persuaded to vote in force by the media tycoon's promise to abolish an unpopular property tax on primary residences and refund the €4bn (£3.4bn) levied in 2012.
The tax was imposed as part of a drive by Monti's technocratic government to put Italy's public finances in order after a collapse at the end of 2011 in investor confidence.
Now that risk is fast taking shape again. Berlusconi is deeply mistrusted in the markets and Grillo wants a referendum on whether Italy should quit the euro. Mired in recession, Italy has had a decade of economic near-stagnation followed by a year of punishing austerity that has made the pledges of both men – though lambasted by their opponents as unfeasible – highly attractive.
| http://www.nytimes.com/2013/02/27/bu...h.html?hp&_r=0 Quote:
Stocks fell Tuesday across Europe and investors sold Italian bonds, a day after an inconclusive election in Italy raised fears that political deadlock there could hamper efforts to restore the economy and complicate the governance of the euro zone.
Stocks fell Tuesday across Europe and investors sold Italian bonds, a day after an inconclusive election in Italy raised fears that political deadlock there could hamper efforts to restore the economy and complicate the governance of the euro zone...
...In afternoon trading in Europe, the Euro Stoxx 50 index, a barometer of euro zone blue chips, was down 2.29 percent, while the FTSE 100 index in London dipped 1.28 percent. The yield on the Italian 10-year sovereign bond, which moves in the opposite direction of the price, gained 0.31 percentage points, to 4.79 percent. The MIB index in Milan was down 4.23 percent.
Bond yields have a direct effect on government financing costs, and it was the rise in Italian and Spanish government yields that led the European Central Bank to promise last July that it would do whatever necessary to save the euro.
| http://finance.yahoo.com/blogs/daily...140431521.html Quote:
Last night's election in Italy is resulting in remarkable market gyrations all around the world.- US stocks had their worst day since November.
- The VIX (a measure of volatility and fear) had an enormous surge.
- The Italian stock market is down nearly 5% today.
- The euro is cratering.
- The Japanese stock market lost over 2% night.
So why does an election in Italy have this kind of huge impact?
"Italy is a massive economy; Greece is nothing compared to Italy," says professor William Black of the University of Missouri at Kansas City of Europe's third largest economy in the accompanying video with The Daily Ticker's Henry Blodget. "Austerity in the middle of a recession is a terrible policy."...
...And this has the potential to undermine all of the progress made in Europe over the past several months. As Morgan Stanley explained in a research note this morning:
In order to activate the OMT, political authorities will have to apply and accept additional conditionality. This is what Italy's electorate appears to have rejected.
(By "conditionality" they mean, the quid-pro-quo whereby the ECB bailout comes with austerity conditions.)
Italy is Europe's single largest debt market. Its debt to GDP is a staggering 120%. Banks around Europe are loaded to the gills with Italian debt. Suddenly, the debt backstop that everyone thought was there (the OMT program) may not be usable, because the voters just gave a huge rejection of pro-austerity politicians.
So now banks around the world are tanking because of their exposure to Italian debt, or because of their exposure to other financial institutions that are exposed to Italian debt. Or maybe they're exposed to Irish, Spanish, French, and Portuguese debt, where politicians might be looking at what just happened in Italy, and thinking: If pro-austerity politicians can get shellacked like that, then maybe we need to rethink and renegotiate our current programs.
And when you have financials taking a beating like this, pretty much everything goes down everywhere.
Even in Japan, things took a beating since there was a huge flight-to-safety bid for the Japanese Yen, and since so much of the Nikkei rally lately has been associated with a weakening yen, a strengthening yen caused stocks to crumble.
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