Italian “fiscal cliff” is approaching, Morgan Stanley warns

The Italian election is a crucial risk event and even though the polls suggest that a centre-left majority in the Lower House is possible, the situation in the Senate is a lot more uncertain, according to research published today by Morgan Stanley.

[asset_library_tag 6347,>]”A hung parliament might push the centre-left and the centre to form at least an informal alliance on certain themes. With former prime minister Mario Monti in the picture, this might give investors a sense of continuity. But one risk is that such a broad coalition looks quite heterogeneous and somewhat unstable,” economists at the bank said.

The next political leaders are likely to maintain sound fiscal policies, with Italy’s primary budget surplus expected to rise further, but whether the pace of economic reform will accelerate meaningfully remains to be seen.

Click here to read the full report – [asset_library_tag 6347,Morgan Stanley on Italy]

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