This report is produced by Skandinaviska Enskilda Banken AB (publ) for institutional investors only. Information and opinions contained within this document
are given in good faith and are based on sources believed to be reliable, we do not represent that they are accurate or complete. No liability is accepted forany direct or consequential loss resulting from reliance on this document Changes may be made to opinions or information contained herein without notice.Any US person wishing to obtain further information about this report should contact the New York branch of the Bank which has distributed this report in theUS. Skandinaviska Enskilda Banken AB (publ) is a member of London Stock Exchange. It is regulated by the Securities and Futures Authority for the conduct ofinvestment business in the UK.
Italian general election: continued post-electionreforms and austerity measures?
20 FEBRUARY, 2013
The Italian general election to be held on 24-25February is expected to result in a compromisealliance between the Centre-left and the MarioMonti-led coalition. This is likely to be sufficient toensure the continuation of reforms and austerity measures.However, the peculiarities of the Italian electoral system, a sharp increase in support for theBerlusconi-led Centre-right coalition and theunusually large number of undecided voters makethe final result unpredictable. Consequently, afurther election and continuing uncertainty cannot be ruled out.
became Prime Minister inNovember 2011 after his predecessor, Silvio
forced to resign amidst a deepening economic crisisand the prospect of facing criminal charges.Subsequently,
Monti’s technocratic governmentintroduced various austerity measures andstructural reforms
(labour market, pension system) toimprove Italian competitiveness. Political stabilityincreased and policies were rewarded by a substantialfall in government bond yields.However, at the beginning of December last year,Berlusconi’s
People of Freedom
party withdrew itssupport for the
government, triggering an earlyelection. The Prime Minster
and a generalelection was scheduled for 24-25 February. On 28December 2012, Monti announced his candidacy asleader of a three-party coalition, his aim being to
defendhis reform agenda
, enabling the continuation ofstructural reforms and austerity measures.
THE ELECTORAL SYSTEM IMPLIES A SUBSTANTIALRISK OF A HUNG PARLIAMENT.
Next weekend’s pollinvolves the election of representatives to the
(lower house, 630 members) and
(upper house, 315 elected members). The Italian
electoral system is complex
, most importantlybecause the so-called majority premiums in the upperand lower houses are determined differently.Consequently, a majority in the lower house in no wayguarantees a similar situation in the upper, where thepremium is calculated on a regional rather than nationalbasis. The difference creates a
substantial risk of ahung parliament
, making the election result difficult topredict since the outcome may be decided in a handfulof key regions.
FOUR MAIN CONTENDERS.
Only four main electioncontenders possess sufficient popular support to make adifference; three coalitions (Centre-left, Centre-right andMonti-led) and a single party (the Five Star Movement).The tendency for individual parties to co-operatethrough coalitions renders them both ideologically andeconomically diverse.The
four-party coalition is dominated byPierluigi Bersani’s Democratic Party (PD), which supportsMonti’s reforms while also including several left-wingparties highly critical of his initiatives, especially hislabour market reforms. The
is themost coherent. The three parties seem to agree on itsleader’s programme targeting Italy’s weak productivityand growth. Berlusconi’s
coalition is analliance between the People of Freedom (Berlusconi),Northern League and other smaller parties, comprisingan ideological mix of conservatism, liberalism andregionalism. Its campaigning has focused on anti-austerity rhetoric. Berlusconi has a poor leadershiprecord in devising and implementing effective reforms.The
Five Star Movement
pursues clearly anti-establishment policies, which include euro scepticismand reform of the political system in favour of greaterdirect democracy. The party has no policies to solveItaly’s weak government finances and lack of economicgrowth.
MOST RECENT POLLS SHOW INCREASEDUNCERTAINTY.
As Italian law prohibits the latepublication of opinion polls, the last was released on 8February. The following table shows results by coalition