MILAN (Reuters) Giorgia Meloni is set to be Italy’s first female premier at the helm of its right-wing-leaning administration after World War Two after leading an alliance of conservatives to win in the election on Sunday.
LUCA CAZZULANI, HEAD OF STRATEGY RESEARCH; LOREDANA MARIA FEDERICO, CHIEF ITALIAN ECONOMIST, UNICREDIT
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“We expect a surprisingly tame market reaction in the context of BTPs credit spread in the near term because the outcome of the election was generally in line with the expectations. A short-term covering option is possible because investors entered the race slightly short BTPs and the possibility of a massive victory by the left is discounted. We expect the BTP-Bund spread over the next 10 years to be trading at around 250 basis points by the end of the year.”
DOMENICO GHILOTTI, ANALYST, EQUITA
“From an economic standpoint we anticipate the spread between BTP and Bun to settle around 230-250 basis points , as we expect market participants to evaluate how the federal government is structured as well as legislation on the budget, barring an abrupt change in tone from this government, or an egregious decline in the macro environment.
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“Higher inflation both in 2022 and 2023 will leave some possibility to keep the GDP/debt ratio in check (higher tax revenues compensating for the higher cost of borrowing and pension expenditure).”
GIADA GIANI, ECONOMIST, the CITI
“A unambiguous victory for one of the coalitions will increase the chances that the new administration will be more long-lasting than previous ones. This also accelerates the process of naming the new government, which is likely to be in place by the end of October.”
“Meloni’s initial major choice will be the selection to the post of finance minister with a pro-Europe, fiscally cautious character looking like a possible option for the moment. We do not anticipate to see a quick push for massive fiscal adjustment, but we do anticipate risks over the long term that the agenda of the right could be in conflict with EU goals.”
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LORENZO CODOGNO, CHEF ECONOMIST, L-MA
“The function of Forza Italia could be vital for the center-right coalition and, consequently, provide a sense of security regarding international alliances as well as the position toward Europe.
“The PD weakened substantially, and The Five Star Movement scored well with respect the opinion polls. Overall with the exception of a few minor but important changes, there’s nothing major has happened that was a shock. The first steps of the new coalition will be vital to determine whether the encouraging signals are confirmed. Yet, many questions remain unaddressed”.
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GIUSEPPE SERSALE FUND MANAGER AND STATEGIST ATRILIA CAPITAL PARTNERS
“There aren’t any major surprise. I’m anticipating a minor impact, given that the League the party with the lowest pro-European views, appears to have come out as weak.”
“For this moment, the market appears to be focused more on macroeconomic issues. If we see a devaluation of Italian assets, it could be because of the elections, but in the end … Italy is an country that has (worrying) budgets, no matter who is in the government.”
“The market was aware of how it was likely to come to an end, and will be focused on the current stage of the growth of Italy’s economy and monetary policy tightening as well as public finances, which are an unstable downward slope to Italy.”