A few days from political elections 2022 next September 25thincluding the ubiquitous investment banks Goldman Sachs confirm the outlook of a victory for the right and wait Giorgia Meloni, in particular, at the gate.
An article by La Repubblica proposes today the view of the Big companies of finance, which, says the title, “Meloni are waiting. But if the NRR is blocked, you are at risk ”.
“Da Ubs a Goldman Sachs – it is read – the investment banks expect a victory of the right. And in their reports they warn of the dangers of slowing reforms and an out-of-control debt “, dreading a BTP-Bund spread at risk of exceeding 300.
According to the world of high finance, the differential would break through 300 in the worst case scenario, that is to say, “In the event that the Meloni government were to move decisively away from the Draghi agenda”. Maybe by listening to the anxiety of running a deficit promptly waved by the leader of the League, Matteo Salvini.
Goldman Sachs: No tax cuts, yes PNRR Draghi
To be precise, warn Goldman Sachs & Co, or in general all the Big in Finance:
“Any postponement of the NRP and tax cuts would reduce the sustainability of the tricolor debt. This is the worst scenario, which for investment banks, in addition to depressing the prices of the Milan Stock Exchange, could bring the spread back beyond the threshold of 300 basis points. Value touched only briefly in 2018, during the yellow-green government 5Stelle – Legaand broken through ten years ago, when the differential touched 600 basis points in the midst of the eurozone crisis ”.
Goldman Sachs threatens to infuriate again the well-fed audience of populists and conspiracy theoristswho had already shouted scandal when reading the report dedicated to Italy in May, when it was still thought that he would have voted in Italy in the spring of 2023
The Republic also stresses the importance of the next key ministers of the next government (in particular the identity of the next Minister of Economy):
“Goldman Sachs in its analysis is betting on a victory for the center-right, but warns: we will have to wait for the government to take office to understand who the key ministers will be, and what will be the priorities of the economic agenda and the budget for 2023 ″.
Goldman Sachs’ view is similar to that of the economists of ING Economics, who wrote in their note that “the performance of Italian bonds (BTPs) towards and on election days must be assessed in the light of the main risks that the bonds face. First, investors will look nervously at the new government in waiting for signs of fiscal divergence compared to the previous administration (Draghi government) “.
The fear of ING Economics – which also pushesimplementation of Mario Draghi’s PNRR – it belongs to a government spend and spend, projected to make expansive fiscal policy – more public spending, less taxes – its backbone. The same fear of a tax cut also haunts the experts of the French Societe Generale, as La Repubblica still writes:
“The promise a tax cut in a context of inflation-recession, Société Générale also worries, according to which the greatest unknown is to understand if and how Giorgia Meloni will continue in the work set by the Draghi government. “If the PNRR were fully implemented – writes Yvan Mamalet, economist for Europe – it could relaunch GDP growth by 0.6% in ten years, but also rreduce the public debt by 12 points, a turning point that would lower the spread curve by 100 basis points ”.
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UBS WM: “Energy crisis looms over politics”
In his Weekly – Regional View Italian Matteo Ramenghi, Chief Investment Officer UBS WM Italy, UBS Europe SE, Succursale Italia, presents its outlook on Italy after the political elections, considering the challenges facing the entire global economy, besieged by the scourge of inflation, caused by the reopening of post Covid activities and made more painful by the effects of the war between Russia and Ukraine.
Among other things, Italy, as well as other European countries, is confirmed in this bleak picture among the illustrious victims of wartime: the sanctions and embargoes inflicted on Russia, on whose gas Europe always depended before the invasion of Ukraine by Vladimir Putin, have actually triggered an energy crisis among the worst in recent years, with consequent phenomena of #caroenergia e #carobollette. And obviously if there is less energy, or if energy is more expensive, the consequences are less production by companies, less employment, less consumption costs, less GDP growth: so much so that we have been talking for a long time about risk of recession in the world.
“The global economy is slowing down and is grappling with a level of inflation that hasn’t been seen for decades – Matteo Ramenghi points out – The exit from COVID, the war in Ukraine and geopolitical tensions have pushed up prices, starting with those of energy, and there are even fears for the supply of gas in Europe next winter. Even if a gas rationing will perhaps be avoided, for some particularly energy-intensive sectors the high cost of energy could lead to a slowdown in activity, with potential repercussions on employment. Not anymore,
therefore, only one issue of company margins decreasing: the energy crisis
it could turn into a recession in the coming quarters ”.
UBS’s investment director underlines the difference between what is happening in Europe and what is happening in the US instead.
“For the United States, we cannot speak of an energy crisis why from this point
of view they are independent, unlike Europebut the price increase
and the resulting rate hike are holding back the economy, despite the households have so far maintained a high level of consumption by reducing their propensity to save. Against this backdrop, some important political events will take place in the fall: the mid-term elections in the United States, the 20th National Congress of the Communist Party of China, in addition to the upcoming Italian elections. In both China and the United States the attention of the market will be concentrated especially on possible changes in foreign policy, given the recent tensions between the two superpowers “, writes Ramenghi, who devotes a broad study both to the economy made in China and to the mid-term elections to be held in the United States. Elections, he points out, that should reconfirm the Democrats in control of the Senate, but that they could also certify the conquest of the House by the Republicans.
Returning to the other crucial event of this autumn, that is the 2022 Italian political elections of the next and imminent 25 September, the IOC of UBS WM Italy points out that “The electoral campaign in Italy so far has not created excessive turbulence for government bonds (BTP & Co.) because of the promises of most parties not to increase the deficit outside of what has been agreed with the European Union. These are different political elections than usual: it is the first time in over 70 years which are held in the second half of the year, a period in which it should be work on the budget law; the number of parliamentarians will drop by a third; and it has rarely happened that, like this time, polls suggest the clear victory of a coalition ”.
Elections: Did Meloni understand the importance of spreads?
“Furthermore – continues Matteo Ramenghi – e this is perhaps the most important difference, in recent years the popularity of the euro has risen a lot: according to Eurobarometer polls by 18 percentage points since 2014. Probably for this reason, unlike the elections of 2018 or 2013, no clear-cut positions against the euro or the European Union emerged, which for its part has launched the Recovery Fund giving many resources to Italy. In view of high inflation and rising energy costs, all parties put forward proposals to cushion the impact on households and businesses. However, most parties seem to have understood that a policy too aggressive fiscal leads to a high spread, subtracting resources from the state and ballasting the entire economy: the high rates paid on public debt are transferred to the banking sector and from there to households and businesses, blocking investments ”.
Of the series, a possible alert spread BTP-Bund is not a weapon unsheathed by the world of high finance to force Italy to do its homework, as a certain populist and conspiracy narrative has been repeating for some time, but a concrete threat that risks, in the event of a surge in the differential, of have concrete and real effects on Italian citizens, and on the economy, in essence, real.
In this regard, Italian politicians will also have understood the importance of the spread and the level of BTP rates, but certainly Giorgia Meloni has returned to insinuate on the markets, among the voters and the investors themselves who look to Italy the doubt that the old Euroscepticism and the old aversion to the European Union are still part of his DNA, where he spoke at the end of the EU
PNRR is the other diktat that economists and strategists have promptly remind Meloni to implement.
So did Matteo Ramenghi of UBS in his weekly note dedicated to Italy:
“The implementation of the PNRR – and this tastes like a warning to Giorgia Meloni – is the other critical aspect: accessing the resources of the Recovery Fund also requires the ability to enact reforms. So far Italy has fully respected the schedule, but if the new government slows down the race points of GDP would be lost along the way ”.
Also keep an eye on the warning from Barclays with a recently published report:
“We believe that the message that emerges from the manifesto is clear: a center-right government would be in favor of a more expansive fiscal policy, characterized by lower taxes and less progressive taxation, higher pension expenses and greater investments in infrastructure. In addition, higher spending is expected to buffer the effects (on households and businesses) of the energy crisis ”. Based on these reflections, Barclays has also produced the outlook on how much Italy’s deficit would rise. In numbers. In the hope that the public accounts do not explode.