Concern former PM will win election is cause for concern according to investors
San Francisco, CA -- (SBWIRE) -- 02/11/2013 -- There are worries beginning to bubble up regarding the political situation in Italy, which has in turn created a wave of concern across European markets.
The concern revolves around the popularity of former Prime Minister Silvio Berlusconi, which has stoked fears of financial chaos within the country. Investors are staying on the sidelines ahead of the European Central Bank's monetary policy meeting on Tuesday.
The Stoxx Europe 600 index fell 0.4% to close at 284.52, following the putting in what was the best performance in the new year the day prior.
“There are clearly concerns that Berlusconi is going to be a big player in the election and markets are worried that it would be perceived as bad for the Italian economy,” said Peter Dixon, strategist at Commerzbank.
“There is certainly a risk that he will end austerity measures, and I think the market will view that as a negative. Investors are starting to display that nervousness and it’s likely to continue until the election,” he added.
The FTSE MIB stock index also fell with a -0.7% showing on the day, falling to 16,602.85, while shares of UniCredit sagged by 1.7% and Intesa Sanpaolo was off 1.6% by the close of the day.
Italian benchmark fell 4.5% after Berlusconi promised to reduce the taxes in the event of his coalition winning on the late-February election. This vow fueled severe concerns that Italy will diverge from the current drive to reform the currency moves that put Greece, Spain, and Italy alike, in dire financial situations.
The former prime minister has recently narrowed the gap on Pier Luigi Bersani to less than 4% in the polls, according to Bloomberg. This is a troubling trend for investors, as Bersani was leading by 14% at the start of the year.
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