Berlusconi’s resignation and Mario Monti’s designation have had an unenthusiastic impact on the European stocks, Barclays notes.
“A positive welcome at the beginning has been followed by a general fall of all indexes, including Milan which had increased about 25 early yesterday in the morning. The political change did not help the 5-year bond auction either, because the Italian Treasure issued €3bn at 6.29%, the highest rate since 1997. After the auction, Italy’s risk premium climbed to 476 basis points from last 453bp.
Waiting for Mario Monti’s government to take shape and adapt to Italy’s current economic difficult times, many questions about the near future of the country arise. Analysts try to answer them. Barclays’s experts are wondering if the new italian government will have enough majority to rule. In this sense, it seems that the center-left will support the provisional government, and even if there is no doubt that the Northern League will not, at the moment, nobody knows which position will be held by Berlusconi’s party, since signs are different and contradictory.
Barclays also considers that 2012 budget approval, including the neccesary amendments to adapt it to Brussels requirements, should force the Italian risk premium to fall very quickly between 50-100 bp.
Regarding the financing needs of Italy, Barclays says that the net needs (meaning new needs) for 2012 are really short, about €35bn.
“The important thing now is to see if investors continue rolling the positions of those bonds that are to mature”.