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Eurozone volatile after Italian elections

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Eurozone volatile after Italian elections

Following on from the news on the Italian elections yesterday (February 25th), it has been suggested that investors should expect a higher degree of volatility.

European economist at asset management firm Schroders Azad Zangana summarised the result of the elections as indicating that political uncertainty has returned to the eurozone.

More weight is likely to be placed on political news flow as a result - and this could have an impact on investors looking at international money transfer.

Mr Zangana said that Italy remains in a more favourable position now than it was in November 2011 when Mario Monti took over from Silvio Berlusconi.

He added that it is running close to a surplus on its public finances, as well as making some favourable progress on its structural reforms.

Going forward, the expert suggested that the most important thing for Italy is to ensure that progress made so far is not reversed, as well as carefully managing expectations and market sentiment.

Indeed, a recent Economic Sentiment Indicator from the European Commission showed a score of 87 in the euro area during December - which is an improvement of 1.3 points when compared with the previous month.

An increase in industry confidence was one of the key contributors to this trend, as many managers predicted a boost in production output for the near future.

Mr Zangana indicated that the European Central Bank might not be able to do anything to alleviate the stress following the Italian elections.

"This is unlikely as its current weapon of choice - outright monetary transactions - are reserved for member states that sign up to a bail-out programme, which of course would require a government to sign off for," he commented.

The expert continued: "In addition, a qualified majority (85 per cent of votes) would be required to activate the ECB's bond buying programme."

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