Strategists at Danske Bank offer their take on the Italian political turmoil, with Prime Minister Mario Draghi’s fate in limbo.
“Italy has been plunged into a new government crisis after three of the four biggest parties of Mario Draghi’s unity government (Five Star Movement, League and Forza Italia) announced they would not support him in a confidence vote.”
“For the past 18 months, Draghi has served as a rare unifying force in Italian politics and has overseen the implementation of important structural reforms (e.g. in the justice system) that are a pre-requisite to receive NGEU funds.”
“If no alternative parliamentary majority can be formed – which currently seems unlikely – President Mattarella would likely have to call for early elections (possibly held on 25 September), just as the crucial budget season is kicking off in autumn.”
“With the exception of Brothers of Italy, early elections are not in the interests of most parties and as a result of recent constitutional changes, lower and upper house seats will be reduced by a third after the next election.”
“Based on current polling, a centre-right coalition led by Brothers of Italy might be the most likely outcome in our view, although a lot could still change once the election campaign gets underway.”