Counterparties: Italy’s protest vote

February 25, 2013

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The votes in the Italian election are in — and it’s 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 “resounding rebuff to austerity policies.” Fabrizio Goria, who’s been tweeting up a storm throughout the election, put it this way: “So, Italians said FU to Merkel, isn’t it?” Joe Weisenthal thinks Monti’s demise is emblematic of Italy’s turn against “elite Europe”.

This has been an election which featured an ex-prime minister who’s 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 “antisystem” message; and Mario Monti, the country’s 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’s center-left coalition. (Bersani’s party was ahead in the house). Comedian-turned-politico Beppe Grillo, beloved by Italy’s 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.

If you’re confused already, Reuters has a quick explainer on how the Italian election works. In short, it’s just as dysfunctional as we saw in Greece last summer.

Markets, not surprisingly, hate the whole “ungovernable” thing. Nicholas Spiro of Spiro Sovereign Strategy warned the FT of the consequences of a Berlusconi win: “financial markets are facing the worst of both worlds in Italy: a full-blown political crisis in the eurozone’s third-largest economy and a severe setback for the liberal economic agenda championed by Mr. Monti.”

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’s most prominent critic, agrees that Monti had placated the debt markets. But unless austerity is rolled back, he writes, Italy’s populist turn will be just a ”foretaste of the dangerous radicalization to come” in Europe. — Ryan McCarthy

On to today’s links:

What the sequester will do: Furloughs, layoffs & benefit cuts for nearly two million long-term unemployed – NYT

America may now have a housing shortage – Sober Look

Crisis Retro
Saying CDOs “could be structured by cows and we would rate it” apparently won’t get you fired at S&P – WSJ

“You always see a lot of M&A activity when the market is overvalued” – James Stewart

Massively subsidized banks are tired of the handouts minimally subsidized credit unions are getting – American Bankers Association

EU Mess
The eurozone never followed its own rules in the past and will break them in the future – Quartz

Healthcare, shame and why “our problem is not a matter of shitty policy arrangements” – Steve Waldman

Fat, sterile, and depressed: the effects of increasing light pollution – Mother Jones

For Sale
The Japanese government is selling part of its stake in the world’s third largest tobacco company – Dealbook

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

British court bans the use of Bayesian probability – Understanding Uncertainty

Facebook is a bad Tupperware party – Douglas Rushkoff

“People who don’t inhale news simply don’t notice bylines” – Kevin Drum

Totally Unsurprising
Dave Eggers thinks we need more handmade things – FT


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