EuroPrice Analysis and Talking Points:
- Italian Snap Elections on the way
- Polling Intentions Show Strong Support for Salvini
- When can Italian Elections Take Place?
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Italian Snap Elections on the way
Last week, League Leader Matteo Salvini turned his back on the populist coalition by tabling a motion of no confidence in Prime Minister Conte at the Senate in a bid to force a snap election as soon as Autumn. This came after the Five Star party opposed the high-speed train link bill on cost and environmental ground, something which had been strongly supported by Salvini’s party. In reaction to Salvini’s announcement, Italian bond yields have once again been on the rise with the Bund/BTP spread widening, albeit not at the highs seen last year. Yesterday, saw the Senate agree to set a date for the no-confidence vote on August 20th.
Polling Intentions Show Strong Support for Salvini
According to the latest polling intentions data, the League Party is seen topping a potential election with support at 37%, which in turn could see Salvini team up with either the Brothers of Italy (7%) or potentially Forward Italy (6%). On the flip side, despite having twice as many seats as the League party, the Five Star have seen their support dwindle since last years election with the party experiencing several setbacks in regional polls.
When can Italian Elections Take Place?
The earliest that an Italian election could take place is mid-October. This would require Prime Minister Conte to lose the confidence with President Mattarella making a decision to dissolve the government, allowing for an election to be held within 45-70 days.
However, the key issue with regard to having an election in October is that it will coincide with the EU deadline for the 2020 budget draft (October 15th). As such, President Mattarella may be unwilling to dissolve parliament to pave the way for a snap election and potentially opt for a technocratic government with the sole task of getting the 2020 budget approved. Although, typically technocratic government have not tended to be widely favoured by voters.
Early elections in October could see further widening of the Bund/BTP spread with the Italian assets under pressure given the uncertainties that this would pose with regard to the 2020 budget preparations. As such, this would also add a further bearish outlook for the Euro going forward with eyes on the 1.10 handle.
Elsewhere, yesterday saw Salvini agree to the Five Star party’s proposal that parliament should vote to cut parliamentary numbers quickly. Although, the Deputy PM noted that elections should then be held immediately. However, a vote to cut the number of MPs is a process that could potentially delay a snap election until Q1 2020.
FX TRADING RESOURCES:
— Written by Justin McQueen, Market Analyst
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