Daily Management Review

The Real Risk In Europe That Investors Should Be Worrying About Is Italy And Not Spain


10/08/2017




The Real Risk In Europe That Investors Should Be Worrying About Is Italy And Not Spain
Despite recent tensions in Spain with Catalonia possibly declaring independence in the coming days, the rise of populist politics in Italy should still be front and center for investors in Europe.
 
"Italy is not generating sustained growth and it still has the issue of bad loans," a Brussels-based official, who preferred to remain anonymous due to his participation in key EU economic meetings, told the media.
 
"The euro zone is growing, even Greece is growing … But let's not get carried away with the short-term success," he added.
 
Since the days of the sovereign debt crisis of 2011, broadly, the region has seen improvement. Business activity has expanded, unemployment has fallen and growth has returned to the bloc. But the biggest risk to the euro zone at the moment as seen by many European economists is Italy. according to recent forecasts from the European Commission, marking slightly above that threshold in 2018, the economy is set to grow below 1 percent this year.
 
Added to that, new elections in Italy are just around the corner, said Claus Vistesen, the chief euro zone economist at Pantheon Macroeconomics.
 
"It's certain that the Five Star Movement (Italy's populist party) will do very well in the upcoming election," Vistesen said.
 
Though there's not a certain date set, Italian voters are due to elect a new government at the start of next year. the same numbers as the governing PD Party, led by former Prime Minister Matteo Renzi, is being polled by the populist Five Star movement at the moment.
 
Italy's compliance with European fiscal rules is at risk due to Five Star's stance. As they need to respect a 3 percent threshold for their deficit-to GDP (gross domestic product) ratio, these rules constrain the ability of euro zone countries to spend. In line with European rules, Italy's deficit is set to reach 2.2 percent of its GDP this year. But nations are also supposed to keep their public debt below 60 percent of their GDP and its government debt is already above EU's limit. It will rise to 133.1 percent of GDP this year, forecasts from the European Commission suggest. Italian finances could be further jeopardized by a populist government.
 
"Beyond Catalonia, it is the Italian election we are concerned about," Andrea Cicione, head of strategy at TS Lombard, said.
 
Given their policies to increase spending, for Italy's fiscal policy, the rising presence of populist parties is a risk, he underlined. Analysts seemed divided over its impact on the euro zone when it comes to Catalonia. Though he admitted that "the longer the situation drags, the riskier it will get for stock markets," Vistesen said that Catalonia is still a long way from becoming independent.
 
After an illegal referendum on Catalonia's independence, Spain's Ibex 35 stock index has been on a downward trend for most of the week.
 
"We see a risk that this escalation may damage the coordination and communication between the two governments, which is essential to Catalonia's ability to service its debt on time and in full," Standard & Poor's warned on Wednesday.
 
(Source:www.cnbc.com) 






Science & Technology

Fast Company: Apple isn't the most innovative anymore

U.S. Space Program Could Be Delayed Due To SpaceX, Boeing Design Risks: Reuters

What trends will be affecting the health sector in the coming years?

Deloitte identifies main cyber threats for power industry

Zenuity To Take Self Driving Car Road Test In Sweden With Permission

Researchers: Half of Facebook users is fake

Amazon’s Ring gets in a privacy scandal

Facebook Is Creating A Stablecoin For Its WhatsApp Users

IBM offers to use the first quantum computer

Passport Numbers Of 5 Million Customers Hacked: Concedes Marriott

World Politics

World & Politics

AirHelp expects up to 33 th of cancellations and flight delays per day all over the world in 2019

Far-right and Catalonia: New elections in Spain

Trump is losing rating because of shutdown

Hanoi, Vietnam Chosen As Place For 2nd Summit Between Trump And Kim Jong-Un

US, China to hold new negotiations in Beijing

Human Rights Not To Be Dissociated From Stability, Macron Tells Sisi

Brexit Hijack Is Not The Parliament’s Right

Macedonia ignites political crisis in Greece