The Macro Report | June 2018

Italy’s Political Opera


Italy’s Giuseppe Conte was sworn in to power in early June to head a new populist government — made up of an unlikely marriage between the anti-establishment 5-Star Movement (M5S) and the far-right League party. The oath ceremony ended a three-month-long political opera in the eurozone’s third largest economy. The inconclusive March elections, the political chaos in forming a government, and the anti-euro leanings of the coalition rattled Italian and global financial markets. The country remains vulnerable to high interest rates, high debt levels, and very low growth.

As Italian markets tumbled, global interest rates continued to trend higher. The yield on the benchmark 10-year U.S. Treasury crossed the 3% psychological barrier, setting a new five-year high. It signaled that higher rates are afoot in the world’s biggest bond market as the Federal Reserve tightens monetary policy. Higher oil prices, which have raised concerns about inflation, will be driven by supply factors, including the possibility that OPEC will boost output in the second half of the year.


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Italy’s Giuseppe Conte was sworn in to power in early June to head a new populist government — made up of an unlikely marriage between the anti-establishment 5-Star Movement (M5S) and the far-right League party.