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AFTER THE ELECTIONS, RENZI IS PUT TO THE TEST

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The election results in Italy, with the landslide victory of Matteo Renzi's Democratic Party and the big setback for the Five Star Movement, “have certainly diminished the fears” the markets felt in the face of a possible anti-European turn in Rome.

This is according to an analysis by the Research Department of Intesa Sanpaolo, published just as the rating agency Fitch stated that the success of the Democratic Party "is positive for Italy's ratings."

The Intesa San Paolo document highlights the need for those in Brussels "to carefully reflect on the role of European institutions in managing the economic and social crisis of the area " - especially in the light of the success of protest votes in France and in the United Kingdom, where Marine Le Pen and Nigel Farage respectively received a large number of votes.

"In such an environment,” the document notes, “Italy and Matteo Renzi can play an important role in Europe," since Renzi is recognized as the only winner among the leaders of traditional parties (along with German Chancellor Angela Merkel)."

"Considering the leadership role that the Democratic Party will assume among European socialists and democrats, Renzi is an essential interlocutor in order to obtain the majority in the Parliament."

According to the analysts at Intesa Sanpaolo, it is unlikely that any doubts will be cast on the standing agreements on budgetary constraints and, more generally, on treaties that have already been ratified.

Looking at the markets, the analysis maintains that "investors will continue to evaluate the path taken by Renzi's government and put it to the test", which is why, according to qualified sources of WikiLao, it is to be expected that "the challenges that Italy's government will foreseeably have to face on the path to reform could still cause an new increase in the spread" between the Italian and German Treasury bonds.

(Photo: Presidenza del Consiglio dei Ministri/Tiberio Barchielli e Filippo Attili)

May 27, 2014