Silvio Berlusconi may have the last laugh -- at Europe’s expense.
Once the subject of German Chancellor Angela Merkel’s barely suppressed titters, the former Italian leader roared back from the political wasteland in yesterday’s election, blocking the formation of a new Italian government and fracturing the euro zone’s brittle newfound stability.
The billionaire’s resurrection coupled with the emergence of comedian-turned-politician Beppe Grillo risked igniting anti- austerity forces in southern Europe’s depressed economies and overturning the German-led crisis-management formula.
“This is the first European election in which voters didn’t do the right thing,” Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York, said in an e-mail. “They gave surprising support to politicians who reject austerity and, in some cases, the euro. This could become a major problem if it proves contagious.”
Bonds of the countries most vulnerable to an investor exodus tumbled after the vote. Ten-year Italian yields rose 31 basis points to 4.81 percent, widening the risk premium against German debt to 332 basis points, the most in three months at 1:45 p.m. in Rome.
“All this clearly points to a high degree of uncertainty which, together with sharply rising bond yields, will delay the slow economic recovery,” Riccardo Barbieri, chief European economist at Mizuho International Plc in London, said in note.
After three years of recession and austerity, southern Europe is sitting on a social powder keg, with 2013 unemployment set to reach 11.6 percent in Italy, 17.3 percent in Portugal, 26.9 percent in Spain and 27 percent inGreece, according to European Commission forecasts on Feb. 22.
source : bloomberg
