Barclays: Italian Political Uncertainty Persists; Risk Assets To Eventually Recover
Wednesday February 27, 2013 8:33 AM
Barclays Capital looks for instability in Italian politics following weekend elections to persist in the near term and slow implementation of structural reforms, but the bank also expects a coalition government to be formed and risk assets to eventually recover. "While important steps have been taken so far by the outgoing technocrat government to regain credibility among the financial markets and European partners, Italy cannot risk being trapped in a political impasse for too long, in our view," Barclays says. "Should that condition persist and the parties not be able to agree on a grand coalition, we think the likelihood of Italy applying for a precautionary credit line would increase." The bank says European risky assets took a "breather" in the early part of Wednesday, with most equity indices and periphery yields stabilizing. The Italian five- and 10-year auctions "went well and have reassured the markets for now.
