After last night’s Italian Referendum which resulted in Prime Minister Matteo Renzi resigning, the Euro having previously lost ground has recovered. The GBP/EUR rate touched 1.20 for the first time since the UK’s Referendum 5 months ago. However whilst the Euro hasn’t suffered to much the Italian banks and businesses have lost ground.
The world’s oldest bank Monte dei Paschi di Siena which has been at the centre of concern especially after the stress test last month, has lost significant ground from their share price. Considering the bank has struggled to generate investment and is in a huge amount of debt, this could be some of the final nails going into the coffin.
Mario Draghi speech re-written
President of the European Central Bank Mario Draghi will this week speak about the current stimulus program which has been ongoing in the EU. Draghi was expected to increase the bond buying program which was expected to stop in March however it looks as if that’s no longer the case.
I would be surprised if Draghi doesn’t raise his concerns with regards to the Italian vote especially as Renzi’s resignation will bring round a shotgun election. With so much anti-EU sentiment bubbling away in Italy the right wing party The 5 Star Movement have a strong chance of gaining power. They have a very clear mandate of giving up the Euro and adopting the old currency.
Italy’s biggest criticism is the stagnation that has never been addressed and this extreme situation is what many believe it will take in order to get the country growing once more.