Counterparties: Italy’s protest vote
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The votes in the Italian election are in — and itâ€™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 â€śresounding rebuff to austerity policies.â€ť Fabrizio Goria,Â whoâ€™s been tweeting up a storm throughout the election, put it this way: â€śSo, Italians said FU to Merkel, isnâ€™t it?â€ť Joe Weisenthal thinks Montiâ€™s demise is emblematic of Italyâ€™s turn against â€śelite Europeâ€ť.
This has been an election which featured an ex-prime minister whoâ€™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 â€śantisystemâ€ť message; and Mario Monti, the countryâ€™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 Bersaniâ€™s center-left coalition. (Bersaniâ€™s party was ahead in the house). Comedian-turned-politico Beppe Grillo, beloved by Italyâ€™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.
Markets, not surprisingly, hate the whole â€śungovernableâ€ť thing. Nicholas Spiro of Spiro Sovereign Strategy warned the FT of the consequences of a Berlusconi win: â€śfinancial markets are facing the worst of both worlds in Italy: a full-blown political crisis in the eurozoneâ€™s third-largest economy and a severe setback for the liberal economic agenda championed by Mr. Monti.â€ť
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 austerityâ€™s most prominent critic, agrees that Monti had placated the debt markets. But unless austerity is rolled back, he writes, Italyâ€™s populist turn will be just a â€ťforetaste of the dangerous radicalization to comeâ€ť in Europe. — Ryan McCarthy
On to todayâ€™s 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