The lean years don’t last forever
05 June 2018
Political concerns have dominated markets in recent months. It has mostly been US President Donald Trump throwing his weight around (tariffs, Iran, North Korea), but in the past week Italy has been the source of market unease. The attempt by Italy’s two populist parties to form a government including an anti-euro finance minister was blocked by the Italian president. The issue is not the instability of Italy’s governments. After all, the country has on average changed government once a year since the end of World War 2. The issue is that Italy is now a key part of the Eurozone (its third largest economy, in fact), and any hint that a new government might pull out of the single currency will cause chaos. Unlike ‘Brexit’, where the UK will continue to use the pound once the UK exits the European Union, an ‘Italeave’ or ‘Quitaly’ event would result in the redenomination of all debts, assets and contracts into a new, probably weaker currency.