Katharina Utermoehl and Aldo Pellegrino at....>

ITALY: Katharina Utermoehl and Aldo Pellegrino at Allianz assess the risks

around the 4 March Italian election. Even though half of the electorate will

likely cast their vote for a Eurosceptic party, Italexit is not on the cards and

recently introduced electoral reforms weakens the Five Star Movement's position.

However, polls are fading for M5S after the peak in the summer months.

- Allianz say that "An outright majority for any single populist party is

clearly out of reach." so, they look for a centre-right led coalition that also

includes the PD as a junior partner. 

- "Rather than a tectonic shift the 2018 election looks set to deliver 'more of

the same'".

- According to Utermoehl and Pellegrino, strong European growth numbers mean

that the market is unlikely to turn against Italian debt. Yet, even in an

adverse scenario Italy pays a low average interest rate on its debt, has a long

average maturity and strong domestic investor base.

- The dangers for Italy sit in the medium term (demographics and low trend

growth) rather than the short term.