Fresh elections would have a high chance of...>

ITALY: Fresh elections would have a high chance of producing a stalemate, but

the possibility of an anti-establishment government with credible European

commitment should not be ruled out, Lorenzo Codogno, former Italian Treasury

Director-General and head of LC Macro Advisors, wrote in a note this morning.

- All parties are calling for immediate elections, and apparently a new

consensus has emerged that it is better to go for elections immediately rather

than wait longer. Lega particularly keen, eyeing strong poll numbers.

- Fresh elections are not yet a done deal, though. A new attempt to form an

anti-establishment government with a credible pro-European commitment (M5S +

Lega, with a pro-European Fin Min?) would probably staunch market pressure.

- In the event of July elections, the most market-negative scenario is that Lega

sides with M5S on anti-Euro ticket: probability 20%, prob of election win: 60%.

- Highest chance of victory - Lega sides w M5S with commitment on Treaties and

the euro or more 'constructive ambiguity' - prob. 35%, prob of victory 90%.

- Stalemate scenarios - Lega re-united w centre right (40% probability, 50%

chance of victory); League runs on its own (5% prob, 5% chance of victory).