Stock markets react to Italy governement

Stock markets react to Italy governement
By Philip Andrew Churm

Economist are watching developments in Italy carefully as the new government takes shape.

As agreements to form a new government in Italy take shape, a row has already begun with Brussels.

Earlier, the leader of the European People's Party, Manfred Weber, said the 5-Star Movement and the League are taking huge risks with the policies they are proposing.

Replying in a tweet, Matteo Salvini told Weber: “after the French, it’s now the turn of German threats.” He added: “You better think about Germany because we just think about the good of the Italians.”

Stock markets across Europe are watching developments carefully and economists are being cautious in their predictions.

Chief Economist with ING-DIBA, Carsten Brzeski, explained: “Even if the coalition agreement is a bit milder than markets had feared, I think the fact is that this new Italian government will clearly check the balances in the EU, in Brussels, in Berlin and we will very easily get back this discussion on what is the right policy prescription.

“It is austerity from the German blog vis-a-vis more investments vis-a-vis more deficit funding and I think this fundamental discussion will really come back and has the potential to also bring back the euro crisis."

The Milan stock market closed 1.5 percent down on Monday amid concerns about the prospect of a 5-Star-League government and the cost of borrowing to fund Italy’s high public debt rose to the highest level in nine months.