Italian Economic Gains Could Be Lost in Government Turmoil

Italian Economic Gains Could Be Lost in Government Turmoil (CNBC)

Just because Italy was finally able to name a president this past summer, doesn’t mean it’s out of the woods economically. In fact, new President Giorgio Napolitano cancelled an appearance today to attend to a “‘disturbing’ political development.” This “development” is growing concern that members of Silvio Berlusconi’s center-right party would resign if their leader was expelled from the government due to tax fraud on Oct. 4. Berlusconi’s ouster would destabilize the fragile coalition government, and even the hint of this destabilization has resulted in FTSE’s MiB index tumbling almost 2 percent, as well as Italy’s 10-year bond rising 80 basis points to 4.46 percent. Should Italy’s economic (Europe’s third largest) retrace its growth towards stability, that situation would undermine the last few months of positive reports as the region struggles out from under recession. And it also would undermine investor portfolios focused on the region, as well.