Algebris’ global credit strategies team comments on the victory in the Italian political elections of Giorgia Meloni, leader of the Brothers of Italy, and the prospect of a center-right government, which will follow the Draghi government. The importance of any Meloni government respecting Mario Draghi’s PNRR is highlighted. Obviously, the markets are also eagerly awaiting the budget law that will be proposed by the new executive:
“The Italian elections ended with a solid victory for the right-wing coalition. The three parties overall obtained about 44% of the votes, leading the coalition to have an absolute majority, under the current system, in both chambers. Fratelli d’Italia (Giorgia Meloni’s party) gave a great show of strength, reaching its all-time high in terms of preferences, equal to 26%, about 8% more than the second party (PD). The result opens up the possibility of a very stable government, a feature not very common in Italian politics, as long as there continues to be unity within the coalition ”.
Algebris points out that “the League, the weakest partner of the winning coalition, has disappointed expectations, totaling preferences equal to around 8%. Therefore, given the poor result obtained, the party will be less decisive for the new government and may even exert some pressure on the current leadership, an overall positive signal for the markets. Looking at the situation from the point of view of the market, the next few weeks of the formation of the government will be decisive. Meloni is not well known internationally and has no government experience. The markets are therefore still in the testing phase, and are ready to test this new leadership day after day, especially in this current volatility environment. The appointment to the Ministry of Finance and the next budget law will be the first key elements to be monitored. Coherence with the previous government’s message on Russia, EU funds and energy policy will also remain on the radar of the markets ”.