Forex Flash: Italy bogged down in electoral stalemate – Westpac

The Italian elections mark an important step in the deterioration in European politics. The idea that Berlusconi was finished will now need to be rethought. The fact that Beppe Grillo commanded such a large part of the vote will emphasize just how deeply concerned Italians are by the kind of austerity that has been forced upon them by Monti’s technocrat Government. Financial markets will now have to take at face value the idea that the protest vote can actually attain an overall majority in some parts of Europe’s legislature. This is indeed a worrying development and one that should rattle financial markets for some time to come.

According to the Westpac Strategy Team, “Our base case assumption going into the Italian elections was that we would come out of it with a workable Bersani/Monti coalition. The issue was not in the lower house (Chamber of Deputies) as this has an automatic booster. The winning party in the lower house is given a bonus that automatically boosts it to a majority. With 99.9% of the vote counted, Bersani had 29.6% and Berlusconi has 29.2%.”