Italian Assets Undermined by Political Concerns

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Italian stocks and government bonds came under heavy pressure from reports that coalition talks between the two leading populist parties could result in a government that breaks with eurozone economic orthodoxy, the Financial Times reported. According to the reports, the anti-establishment Five Star Movement and far-right League had discussed proposals to ask the European Central Bank to write off about €250bn of its holdings of Italian debt, and to call for the creation of a mechanism to exit the euro. “The report left the lingering sense that, if agreement between the parties is eventually reached, Italian economic policy under a government led by M5S and the League might be no more appropriate than Greek economic policy under the first Syriza government,” said Chris Scicluna at Daiwa Capital Markets. Read more. (Subscription required.)