Counterparties: Italy’s protest vote
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The votes in the Italian election are in — and it‚Äôs not likely that Italy will be able to form a government.
The FT writes that Italy is facing a second election, after voters delivered a ‚Äúresounding rebuff to austerity policies.‚ÄĚ Fabrizio Goria,¬†who‚Äôs been tweeting up a storm throughout the election, put it this way: ‚ÄúSo, Italians said FU to Merkel, isn‚Äôt it?‚ÄĚ Joe Weisenthal thinks Monti‚Äôs demise is emblematic of Italy‚Äôs turn against ‚Äúelite Europe‚ÄĚ.
This has been an election which featured an ex-prime minister who‚Äôs about to face trial for allegedly having sex with an underage night-club dancer and who was sentenced to four years in prison for tax evasion; a comedian running on an ‚Äúantisystem‚ÄĚ message; and Mario Monti, the country‚Äôs current prime minister, whose campaign a rival compared to a coma, and whose alliance is set to finish in fourth place.
Polls showed Silvio Berlusconi’s center-right party leading in the Senate vote over Pier Luigi Bersani‚Äôs center-left coalition. (Bersani‚Äôs party was ahead in the house). Comedian-turned-politico Beppe Grillo, beloved by Italy‚Äôs 40-somethings, was expected to win 64 seats in the Senate — the largest vote haul of any individual party. The Bersani and Berlusconi coalitions, by contrast, will both get only 116 or so seats each — nowhere near the 158 seats needed for a majority. Because a government needs to have a majority in both houses to pass laws, the split Senate vote could make the country ungovernable and lead to another election.
Markets, not surprisingly, hate the whole ‚Äúungovernable‚ÄĚ thing. Nicholas Spiro of Spiro Sovereign Strategy warned the FT of the consequences of a Berlusconi win: ‚Äúfinancial markets are facing the worst of both worlds in Italy: a full-blown political crisis in the eurozone‚Äôs third-largest economy and a severe setback for the liberal economic agenda championed by Mr. Monti.‚ÄĚ
Late last year, Monti said that his economic agenda may have saved the Eurozone. But his $43 billion austerity project, which included budget cuts, higher taxes, and raising the retirement age, certainly seems to have cost his party the election. Paul Krugman, probably austerity‚Äôs most prominent critic, agrees that Monti had placated the debt markets. But unless austerity is rolled back, he writes, Italy‚Äôs populist turn will be just a ‚ÄĚforetaste of the dangerous radicalization to come‚ÄĚ in Europe. — Ryan McCarthy
On to today‚Äôs links:
Inside a NYC brokerage firm that ex-employees describe as a Red Bull-fueled boiler room – Bloomberg
Banks are dumping their crisis-era CDO books, and hedge funds are buying – IFRE
The top 50 companies that hedge funds are shorting – Business Insider