WILL ITALY KILL THE EURO, KILL ITSELF, OR BOTH?
Italy has progressed from pre-insurrectional anger to outright revolt. Insouciant markets are betting that this can somehow be contained. It smacks of delusion.
Risk spreads on Italian 10-year bonds are exactly where they were a week ago before the "anti-system" parties of Left and Right swept away the post-War establishment. The euro has shrugged off the vote entirely, rising 2% against the dollar since the earthquake.
Investors are acting as if they think Italy’s "poteri forti" and its eternal mandarin class will organize another technocrat government regardless of what has happened, or that the Five Star Movement’s Luigi Di Maio will cobble together a co-opted centre-Left coalition that scarcely differs from the last one.
Now damage control has begun. Praise is suddenly effusive for the elegant choir-boy leader Di Maio sitting on 33% of the vote. “Five Star does not frighten us, we have lived through worse,” the business lobby Confindustria says.
This is to play down the genesis of the Five Star phenomenon and the party’s avowed intent to push an eclectic anti-capitalist agenda inspired by the neo-Marxist writings of Thomas Piketty. The markets are singing in the dark.










