This note was originally published February 25, 2013 at 17:32 in Macro
Yesterday's results (which are still being tabulated) suggest a hung parliament in Italy, with Berlusconi taking the upper house and Bersani winning the lower house. Given that both houses have equal powers, the stalemate suggests that today’s results will force Italy’s President to call for an interim government and another round of voting.
The results show that Italians voted against the fiscal reforms under Monti. The Italian 10YR yield increased 12bps versus to 4.49% and the spread versus German bunds increased 14bps as the EUR/USD fell -0.89% to $1.3076 on the day.
Broadly, today’s results show that economic uncertainty breeds political uncertainty, a case we seen time and time again across the Eurozone. We think this power vacuum should put upward pressure on Italian sovereign and bank spreads, a drag on the country's already weak economic fundamentals.
While final votes are still being tabulated, the key take-aways of today’s results are:
- Strong support for Peppe Grillo and his anti-austerity party (The Five Star Movement, M5S) and increased support for Silvio Berlusconi’s center-right People of Liberty Party (particularly in the upper house) took needed support from Pier Lugi Bersani and his center-left Democratic Party alliance to led to a mixed upper and lower house result.
- Since Grillo’s party is not looking to form a coalition with anyone, his support is simply creating a wedge in coalition building
In the Lower House (630 seats) -
- Bersani took majority control, gaining some 340 seats, on 29.2% of the vote, according to projections
- Berlusconi got 28.7% and 121 seats
- Grillo received around 111 seats on 26.1%
- Monti took a mere 8.4%
In the Upper House (315 seats) -
- Berlusconi may have "won" the Senate race with 113 seats, according to RAI forecasts by gaining the key swing regions of Sicily, Campania and Lombardy
- Bersani – 105 seats
- Grillo – 63 seats
- Monti – 20 seats