The economy is likely to be the biggest influencer over Sunday’s Italian Election 2018, with Silvio Berlusconi back in the spotlight as he leads the centre-right coalition in battle against the Five Star Movement’s Luigi Di Maio and the Democratic Party’s (PD) Matteo Renzi.
Italian public debt has risen from an already high 100 percent of GDP at the end of 2007 to more than 130 percent, with only Greece facing a more dire economic situation in Europe.
And bad loans from businesses hurt by the ailing economy have built up in the banking system after companies were unable to service them – making the pile of non-performing loans the biggest of any country in Europe.
The bad loan stack is now so vast it amount to almost a quarter of the total in the EU.
Foreign Exchange analysts predict if either Five Star Movement (M5S) or Lega are involved in forming a government, confidence could plummet and the Euro could fall as low as £0.87p ($1.20).
However, many of Italy’s problems concern its stuttering economy and therefore the markets are now looking across at larger political rumblings with greater interest.
Mr Ingram said: “Until very recently it appeared markets had become totally desensitised to political risk.
“From Brexit through to the Trump Presidency, markets have tended to shrug off unexpected and potentially disruptive political developments, if not actively spin them positively.”
The expert adds Italy started to reverse its chronic underperformance versus the rest of Europe when then-prime minister Matteo Renzi resigned after failing to enact constitutional reform.
However, former European economics editor of The Economist Paul Wallace says the “Italian political risk is overhyped”
He said: “The risks posed by politics in Italy are usually exaggerated. The governing class is adept at extricating the Italian state from tight spots.
“Sunday’s vote is more likely to result in political paralysis arising from a hung parliament than either a disruptive new government or a further resort to the technocrats.“
“A parliamentary stalemate would be undesirable but it should be manageable. The political horror story will turn out to be just that: a story.”
But, he added: “If there is too much angst about Italian politics, there is too little about the economy”.