The prospects of a fresh election after the summer look imminent now
- Italy's Conte reportedly discussed political situation with president Mattarella
- Italy's League says only alternative to current government is new elections
- Italy's Salvini says it's necessary to hold fresh elections
- Euro slides on Italian election talk
This has been in the making ever since Salvini won big in the European Parliament elections back in May. Here's an excerpt from our coverage at the time:
For now, we can expect more political shuffle and potential uncertainty. One of the more immediate focus will be on Italy as Salvini could look to cut ties with Di Maio's Five Star Movement and trigger a general election again.It's a bit too soon to jump to any conclusions and both parties have said that they will continue to work together as a coalition government but we all know politicians... Salvini's probably sharpening his knife already.
As such, it comes as no surprise that we're seeing things heat up over the past few weeks. As soon as the summer break is over, expect the political situation to escalate and a general election to be triggered.
Given Salvini's authority and support from the European Parliament elections, expect him to not hold back this time around and spew out a more populist and anti-euro agenda.
We'll then be gravitating towards a renewed focus on Italian bonds and any sharp moves will no doubt play a part in impacting the euro, much like what we saw last year when heightened political risks saw the 10-year BTP-bund spread widen to over 300 bps:
