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You can find the current article at its original source at https://www.theguardian.com/world/2018/may/29/italy-risk-new-financial-crisis-wake-coalitions-collapse-investors-alarmed-mood-against-euro
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| Italy at risk of new financial crisis in wake of coalition's collapse | Italy at risk of new financial crisis in wake of coalition's collapse |
| (35 minutes later) | |
| Italy risked careening into a new financial crisis amid a warning from the Bank of Italy that the country’s leaders could not “disregard” fiscal constraints and its treaties. | Italy risked careening into a new financial crisis amid a warning from the Bank of Italy that the country’s leaders could not “disregard” fiscal constraints and its treaties. |
| The remarks by Ignazio Visco, chairman of the Bank of Italy, who said the country was at risk of losing the “asset of trust”, came as markets were hit once more, with investors and senior politicians in Brussels growing more alarmed that the mood against the euro in Italy is strengthening. | The remarks by Ignazio Visco, chairman of the Bank of Italy, who said the country was at risk of losing the “asset of trust”, came as markets were hit once more, with investors and senior politicians in Brussels growing more alarmed that the mood against the euro in Italy is strengthening. |
| The yield on two-year bonds rose to 2.442%, the highest level in four years. | The yield on two-year bonds rose to 2.442%, the highest level in four years. |
| The political crisis was set off late last week when the leaders of the country’s biggest populist parties – Luigi Di Maio of the the anti-establishment Five Star Movement (M5S) and Matteo Salvini of the far-right Lega – insisted that the Italian president, Sergio Mattarella, approve their choice of a finance minister, Paolo Savona, who is a fierce critic of the euro. Mattarella vetoed the nomination – a power that he is given in the Italian constitution – but faced an immediate backlash and the collapse of the incoming populist government before it even took power. | The political crisis was set off late last week when the leaders of the country’s biggest populist parties – Luigi Di Maio of the the anti-establishment Five Star Movement (M5S) and Matteo Salvini of the far-right Lega – insisted that the Italian president, Sergio Mattarella, approve their choice of a finance minister, Paolo Savona, who is a fierce critic of the euro. Mattarella vetoed the nomination – a power that he is given in the Italian constitution – but faced an immediate backlash and the collapse of the incoming populist government before it even took power. |
| The president appointed a new prime minister, Carlo Cottarelli, a former director at the International Monetary Fund, and mandated him to form a new government. Cottarelli is expected to lose a vote of confidence in the Italian parliament, which in turn will likely prompt calls for a new election, possibly as early as September. | The president appointed a new prime minister, Carlo Cottarelli, a former director at the International Monetary Fund, and mandated him to form a new government. Cottarelli is expected to lose a vote of confidence in the Italian parliament, which in turn will likely prompt calls for a new election, possibly as early as September. |
| In Brussels, politicians were supportive of Mattarella’s move, which was seen as safeguarding the fiscal commitments Italy has agreed, and protecting its position in the eurozone. | In Brussels, politicians were supportive of Mattarella’s move, which was seen as safeguarding the fiscal commitments Italy has agreed, and protecting its position in the eurozone. |
| But there was also growing concern that the Italian president may have opened the door to a new election that would allow the populist parties to win an even bigger parliamentary majority, creating a bigger risk for the future of the eurozone. | But there was also growing concern that the Italian president may have opened the door to a new election that would allow the populist parties to win an even bigger parliamentary majority, creating a bigger risk for the future of the eurozone. |
| Donald Tusk, the European council president, felt moved to slap down the German budget commissioner, Günther Oettinger, over comments suggesting the markets would illustrate to the Italian voters the dangers in voting for populists. | |
| In an unusual intervention, he tweeted: “My appeal to all EU institutions: please respect the voters. We are there to serve them, not to lecture them.” | |
| Oettinger made the comments in an interview with the German news network, Deutsche Welle, to be aired in Tuesday night. “Italy’s economic development could be so drastic that this could be a possible signal to voters not to choose populists from left and right,” he said. | |
| The Italian embassy in Brussels also responded by tweeting to Oettinger and Tusk: “Italian voters do not need any teaching. Free #elections and #democracy are key European values.” | |
| Manfred Weber, leader of the largest group, the European People’s party, of which the German chancellor, Angela Merkel, is a member, said he trusted in the Italian constitution and its president. | Manfred Weber, leader of the largest group, the European People’s party, of which the German chancellor, Angela Merkel, is a member, said he trusted in the Italian constitution and its president. |
| The leader of the socialist group, Udo Bullmann, a German MEP, said Mattarella had done “a great job” and had “safeguarded the future of the next generation”. | The leader of the socialist group, Udo Bullmann, a German MEP, said Mattarella had done “a great job” and had “safeguarded the future of the next generation”. |
| But Philippe Lamberts, leader of the Green group, expressed the views of many by warning against complacency. He said: “Let me be clear: I have no time for the government that was being formed in Italy, but like it or not that was the choice made by Italians and at some point in time you have got to accept that. Would it have endangered the eurozone? Yes, of course, but what we have seen over the weekend [is] that tensions in the financial markets have not calmed down but been exacerbated.” | But Philippe Lamberts, leader of the Green group, expressed the views of many by warning against complacency. He said: “Let me be clear: I have no time for the government that was being formed in Italy, but like it or not that was the choice made by Italians and at some point in time you have got to accept that. Would it have endangered the eurozone? Yes, of course, but what we have seen over the weekend [is] that tensions in the financial markets have not calmed down but been exacerbated.” |
| The former prime minister of Belgium, Guy Verhofstadt, who leads the liberal group, said the crisis proved the need for an EU finance minister with a budget and a banking union to ease the pressure on the eurozone during such periods of political instability. “Everyone knows what we need to do,” he said. | The former prime minister of Belgium, Guy Verhofstadt, who leads the liberal group, said the crisis proved the need for an EU finance minister with a budget and a banking union to ease the pressure on the eurozone during such periods of political instability. “Everyone knows what we need to do,” he said. |
| Mattarella has faced a political storm at home and abroad for his decision, including threats of violence, because of accusations that it was politically motivated and allegations that the two populist parties which emerged as the winners of the 4 March election had a mandate to challenge the euro. In his statement on Sunday night, Mattarella emphasised that he had accepted the populist government’s recommendations, despite “perplexities” over its choice of prime minister, with “a great sense of cooperation”. | Mattarella has faced a political storm at home and abroad for his decision, including threats of violence, because of accusations that it was politically motivated and allegations that the two populist parties which emerged as the winners of the 4 March election had a mandate to challenge the euro. In his statement on Sunday night, Mattarella emphasised that he had accepted the populist government’s recommendations, despite “perplexities” over its choice of prime minister, with “a great sense of cooperation”. |
| “I shared and accepted all the proposals made for the ministers, except the one for the minister of the economy,” he said. He added that he had sought an individual who “may not be seen as the promoter of a line of reasoning ... that could probably, or even inevitably, provoke Italy’s exit from the euro. This is evidently quite different from having a strong attitude within the European Union in order to improve it for the better from the Italian point of view.” | “I shared and accepted all the proposals made for the ministers, except the one for the minister of the economy,” he said. He added that he had sought an individual who “may not be seen as the promoter of a line of reasoning ... that could probably, or even inevitably, provoke Italy’s exit from the euro. This is evidently quite different from having a strong attitude within the European Union in order to improve it for the better from the Italian point of view.” |
| Until the weekend, investors had remained calm about the prospects for the Italian economy and its public-sector debt mountain, which ranks as the third largest in the world behind the US and Japan. But that changed this week. | Until the weekend, investors had remained calm about the prospects for the Italian economy and its public-sector debt mountain, which ranks as the third largest in the world behind the US and Japan. But that changed this week. |
| The Milan stock market slumped to the lowest level since July in early trading at 21,333, down more than 1,000 points from the previous day and 3,000 points lower than its best performance this month. | The Milan stock market slumped to the lowest level since July in early trading at 21,333, down more than 1,000 points from the previous day and 3,000 points lower than its best performance this month. |
| Investors also gave a vote of no confidence in the French and German stock markets, sending them down more than 1%, while the euro, which Italy uses as its currency along with 18 other countries, dropped to its lowest level against the dollar in six months. | Investors also gave a vote of no confidence in the French and German stock markets, sending them down more than 1%, while the euro, which Italy uses as its currency along with 18 other countries, dropped to its lowest level against the dollar in six months. |
| Fiona Cincotta, senior market analyst at spread-betting firm City Index, said Italy’s unsettled domestic politics had also damaged confidence in London, where the FTSE 100 opened down 0.8% at 7,668.42. | Fiona Cincotta, senior market analyst at spread-betting firm City Index, said Italy’s unsettled domestic politics had also damaged confidence in London, where the FTSE 100 opened down 0.8% at 7,668.42. |
| She said the euro was “looking frail” and “heading lower against major currencies as Italy’s domestic strife cast a dark cloud over Italy’s relations with the EU”. | She said the euro was “looking frail” and “heading lower against major currencies as Italy’s domestic strife cast a dark cloud over Italy’s relations with the EU”. |
| Philippe Waechter, chief economist at Ostrum Asset Management, said investors were spooked by concerns that the euro was falling out of favour with the Italian public. | Philippe Waechter, chief economist at Ostrum Asset Management, said investors were spooked by concerns that the euro was falling out of favour with the Italian public. |
| The latest European commission Eurobarometer survey in October found that 40% of Italians believed the euro to be “a bad thing for the country” as compared with 25% of the population in the eurozone as a whole, he said. | The latest European commission Eurobarometer survey in October found that 40% of Italians believed the euro to be “a bad thing for the country” as compared with 25% of the population in the eurozone as a whole, he said. |
| “Only 23% of Spaniards think that the single currency is bad for Spain,” he added. | “Only 23% of Spaniards think that the single currency is bad for Spain,” he added. |
| The spread between Italy’s 10-year bond, which is the benchmark for ratings of government debt, and its German equivalent grew further to touch more than 270 basis points from Monday’s 235 close, its highest since September, 2013. | The spread between Italy’s 10-year bond, which is the benchmark for ratings of government debt, and its German equivalent grew further to touch more than 270 basis points from Monday’s 235 close, its highest since September, 2013. |
| Italy | Italy |
| Eurozone | Eurozone |
| European Union | European Union |
| Europe | Europe |
| Five Star Movement | Five Star Movement |
| Euro | Euro |
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