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Fitch Warns Italy’s Government May Not Survive Amid Calls For A Vote Of Confidence

Update: Picking a perfect moment to prove Fitch’s point, Bloomberg reports that the Italian government may call a vote of confidence in the Senate on the migration measures. This would aim to strong-arm Five Star dissenters who face expulsion from the party if they vote against the government.

Additionally, Five Star and the League are also at loggerheads in the lower house of parliament over Five Star’s demand in an anti-corruption bill to scrap time limits on how long people can be prosecuted after an initial trial. Salvini has said the government must “avoid trials that last forever, also for the innocent, which would be a defeat for everyone.”

It appears that if the internal bickering within Italy’s “coalition” government continues, the EU may just opt to wait to discuss the Italian deficit with whatever government comes as a replacement.

* * *

While European bond traders have been focused on the escalating standoff between Italy and Brussels over Italy’s budget-busting deficit proposal, which culminated this morning with EU’s Dombrovskis warning that the European Commission is considering a sanction procedure against Italy if the budget does not change – even as Italy has sternly refused to change the budget – this morning the head of Fitch’s sovereign ratings, James McCormack, warned that uncertainty involving Italy’s coalition government is as great a risk for BTP investors as the budget for the simple reason that the government may not survive as its members are “too  different.”

Speaking on Bloomberg TV, the Fitch strategist said that there are not many things that the coalition partners agree on, and that raises questions about the government’s survival.

We are not convinced that this coalition government is actually going to survive. It has very different coalition partners” and there are “not many things that they agree on”, McCormack said.

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