Italy’s political turmoil rattles European stock markets

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Political instability in Italy has affected stock markets in Europe, with shares across the continent experiencing a falling trend at the opening.

European stock markets sank on Monday, after Italian Prime Minister Mario Monti announced his intention to resign and former Premier Silvio Berlusconi said he would run to become the country’s leader for a fifth time.

Milan’s main index slumped more than 3.2 percent, while London’s benchmark slid almost 0.2 percent and main indexes in Paris and Frankfurt went down about a half percent each.
“Whether it’s Monti’s early departure or the fact that Berlusconi is going to run for office again that’s proving the most unsettling for markets is clearly open for debate,” AFP quoted head of derivatives at brokerage Interactive Investor, Mike McCudden as saying.

“Monti’s appointment and formation of a technocratic government really was seen as the only way to steer Italy away from Armageddon, and strong leadership to ensure austerity is implemented — and tax receipts continue to creep higher — is imperative.”

The political uncertainty also caused the 10-year yield on the market for existing government bonds to jump to 4.759 percent on Monday, from 4.525 percent late on Friday.

Berlusconi announced during a press conference on December 7 that he will lead his center-right People of Freedom (PDL) party in the 2013 general elections.

The day after Italian President Giorgio Napolitano’s office announced Monti’s resignation in a statement, saying Monti “does not think it possible to continue his mandate and consequently made clear his intention to present his resignation.”

Berlusconi, who served three times as the country’s prime minister from 1994 to 1995, 2001 to 2006, and 2008 to 2011, resigned last November after coming under immense pressure for mishandling the Italian economy. Since then, Monti has replaced him as the premier of the recession-hit country.

Tough austerity measures, spending cuts, and pension changes, introduced by Monti’s government, have stirred serious concerns for many people in the debt-ridden country.

Italy started to experience recession after its economy contracted by 0.2 percent in the third quarter of 2011 and by 0.7 percent in the fourth quarter of 2011.

 

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