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24 January 2013

Reuters: Investors grow cagey as Italy election nears


As Silvio Berlusconi's pre-election media blitz intensifies, so do fears of a costly detour from Italy's road back to economic strength.

While few are betting on a Berlusconi comeback, the former premier has steadily cut back a wide opinion poll lead held by the biggest centre-left group, the Democratic Party, thanks to a slew of television and radio appearances. While the centre-left is still clear favourite to win the election and seize control of the lower house, Berlusconi is trying to prevent its control of the Senate, which would make it tougher for a new government to implement painful reforms and keep a coalition together.

Mario Monti, the technocrat parachuted in to succeed Berlusconi as premier in Italy's hour of need, has pushed through several unpopular fiscal reforms in an effort to bring the country's enormous debt under control. He is now standing as a candidate against Berlusconi but so far has failed to boost his centrist alliance as much as he had hoped. Nevertheless, many analysts say the changing poll ratings could increase the chance that the centre-left is forced to make an alliance with Monti's group, keeping Berlusconi out.

There are fears that Italians, resentful of government mismanagement while they have kept their personal finances in order - boasting one of the lowest household debt-to-savings ratios in the EU - could be swayed by the lure of a more relaxed regime offering tax cuts. Some commentators argue that robust recent demand for Italian bonds is down to an increasingly desperate search for longer-term income among investors, who remain on high alert for downside in the event of an upset.

Full article



© Reuters


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