Euro, BTPs Hit On Local Reports Italy May Hold Early Elections
By Tyler Durden
The Euro has been hit this morning, losing some 50 pips following reports in both La Repubblica and Corriere, that Matteo Renzi may stay in power for several weeks before potential early elections in January-February of 2017. According to La Repubblica, Renzi may ask that early elections are held in near future in return for staying in power until then. As previously reported, the next Italian general election must be held no later than 23rd May 2018.
The move has pressured other Italian assets, with BTP futures retreating from highs and the Italian bank index paring gains as investors focus on potential for Italian elections to be held early next year.
However, there has been some confusion about the date of the snap elections, because President Mattarella reportedly doesn’t see elections in February technically feasible because changes are needed to the country’s election law known as Italicum.
There is another consideration: should snap elections be hald soon, they would likely lead to a victory for Italy’s anti-establishment Five Star Movement, which as noted on Sunday has already called for immediate elections after the outgoing prime minister Matteo Renzi’s defeat in a constitutional referendum, saying it was prepared to put forward a new government that could immediately assume power.
While it appears unlikely that Beppe Grillo, a former comedian and co-founder of the populist party, will get his general election wish, the bold demand showed his Movimento Cinque Stelle (M5S) now has its sights on an even greater electoral victory: one that would eventually land it in the prime minster’s residence in Palazzo Chigi.
As the Guardian reported, many analysts pointed out that M5S still faces considerable obstacles, including probable reforms of electoral law that will make it difficult for the party to get a majority. “But even if such manoeuvres keep it at bay temporarily, one thing is clear: the party is now the second most powerful force in Italy behind Renzi’s diminished Democratic party.”
Vincenzo Scarpetta, a senior policy analyst at the thinktank Open Europe, said M5S would have a fair chance of winning the next general election under current electoral rules, but those rules are likely to change in coming months under the current Democratic-controlled parliament, which may be the impetus behind delaying elections as much as possible, and why today’s report of early snap elections has led to Euro weakness.
The decision to call immediate elections ultimately falls with Italy’s president, Sergio Mattarella.
Source: Euro, BTPs Hit On Local Reports Italy May Hold Early Elections
