Matteo Renzi’s position has been strengthened by Italy’s presidential election. The prime minister persuaded the electoral college, made up mainly of parliamentarians, to choose Sergio Mattarella – against the wishes of Silvio Berlusconi, the media magnate, former prime minister and up to now Renzi’s quasi-partner.
A possible bank run is Greece’s Achilles’ heel.
The country probably won’t be forced out of the euro. But there is a scenario where this could happen. This involves Syriza, the radical-left party, winning the upcoming election and then running out of time before it can perform the policy U-turn necessary to keep its creditors on side. Depositors might then panic.
Matteo Renzi’s Plan A is to push through domestic reforms, hope the European Central Bank manages to get inflation ticking up, and keep his fingers crossed the Italian economy stops shrinking. But if this fails, a mega wealth tax, debt restructuring and/or exit from the euro beckons.