Forget Moody’s. If you want to see market panic, just look at Italy. As Isabel reported this morning, the unexpectedly strong performance of Beppe Grillo’s anti-establishment party, the Five Star Movement, has produced an extremely close election result, and no clear winner.
While the electoral system guarantees a majority in the Chamber of Deputies for the group with the largest vote share (Pier Luigi Bersani’s centre-left group), it does not do so for the Senate. With no group securing a majority in the upper house, Italy now faces coalition negotiations and likely another election.
Citi calls this ‘probably the worst possible outcome for Italy’ — thanks to the political uncertainty, the ‘anti-austerity message being conveyed by voters’ and the ‘absence of a cohesive and credible political leadership’. And the markets seem to agree. The Italian stock exchange has fallen by 6.7
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