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1.Market Observations, 8.Was Sticky

2 June 2018 (AFR) – Italy’s debt still a threat, ‘barely sustainable’: UBS chief economist

(2 June 2018, AFR, p29, by Patrick Commins)

‘We started the week with Italy on the verge of constitutional crisis and the threat of fresh elections, and ended with the promise of a new coalition government. It’s fair to say that European investors have endured a wild rollercoaster ride. On Tuesday night Italian yields jumped by the most in at least two decades after President Sergio Mattarella rejected the Eurosceptic finance minister proposed by the Lega Nord and Five Star Movement. These are the two populist parties which together took the lion’s share in recent Italian national elections and had finally agreed to work together to form government. Rather than accept Mattarella’s veto, the two parties threatened fresh elections, as soon as July. Experts fretted that the two parties would gain further ground on a building wave of anti-EU sentiment.  But by Friday morning it looked like there would be compromise and that Italians would soon have a government, with the offending Eurosceptic shuffled to a different role. All of which leads us to ask: have we just witnessed the latest, preemptive dummy spit?’

Read more at AFR.com (might need AFR login access, or try: AFR.com/trial)

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