Italy ‘Brexit’ looms
Anti-EU forces spurring tumult
Rome could be headed toward an Italian-style Brexit, leading to the prospect of turmoil that would spur political and economic ripple effects around the world.
The tumult that struck the stock market in the United States Tuesday came from political uncertainty in Italy, which remains without a ruling government two months after elections.
Anti-European Union far-right and populist parties won wide support from voters in March, but not enough to form a governing coalition.
That could lead to new elections later this year that some view as a referendum on Italy’s future in the European Union.
Spurred by stagnant economic growth and high unemployment, Italians in March largely backed the anti-establishment Five Star Movement and the far-right, anti-immigrant League party in parliamentary elections.
Neither party, however, had enough backing to form a coalition government.
With no government in place, Italian President Sergio Mattarella has been forced to tab a caretaker prime minister, and this past weekend picked former International Monetary Fund official Carlo Cottarelli.
Chaos ensued after Mattarella also blocked the appointment of anti-euro Paolo Savona as finance minister, angering the Five Star Movement and League.
Mattarella blocked Savona on grounds that he once argued Italy should be prepared to quit the EU.
“Membership of the euro is a fundamental choice for the future of our country and our young people,” said Mattarella, elected president in 2015.
Cottarelli has pledged that his government would uphold Italy’s “essential” role in both the EU and in the eurozone.
“This isn’t democracy, this isn’t respect for the popular vote,” railed Matteo Salvini, firebrand leader of the League.
“It’s just the last gasp of the strong powers who want Italy as a frightened, precarious slave.”
Salvini accused Mattarella of being out of touch with common Italians.
“The next elections will be a plebiscite: The people and real life versus the old castes and the ‘lords of the spread,’ ” Salvini said, referring to the borrowing costs, or “spread,” that Italy pays.
A new vote could be held as early as September.
Analysts fear Mattarella has inadvertently strengthened anti-EU forces in Italy and pushed the nation once step closer to bolting the single-currency coalition.
European allies, such as French President Emmanuel Macron and German Chancellor Angela Merkel, back Mattarella’s pro-EU stance.
But everyday Italians, struggling to make ends meet, question whether the EU is really an economic benefit for them.
Snap elections could very well turn into a proxy war over Italy’s EU future. And in the wake of the nation’s economic stagnation, a Brexitlike vote could suddenly be on the table.
“I call citizens to mobilize, make yourselves heard, it’s important that you do it right now. We will organize peaceful and symbolic demonstrations,” said Five Star leader Luigi Di Maio.
The stock market had its worst day in more than a month on Tuesday after political turmoil in Italy threatened to derail the euro.
The Dow Jones industrial average lost as much as 505 points, almost 2 percent, to 24,247.84, in early afternoon trading — the biggest intraday drop-off since April 6. By the end of the day, the blue chip index had recovered somewhat, to 24,361.45, down 391.64.
Italian President Sergio Mattarella on Tuesday hinted that there could be a special election as early as September after he blocked the formation of a nationalist coalition. Investors fear the unusual move could end up strengthening parties that want to pull out of the eurozone.
The prospect that Italy, which has Europe’s third-largest economy, will pull out of the shared continental economy immediately prompted comparisons to Brexit, when Eng- land pulled out of the European markets.
“There was uncertainty around Brexit. With Italy, the damage would be far greater” to the euro, Quincy Krosby, chief market strategist at Prudential Financial, told The Post.
The selloff threatened to put a hard stop to two months of relatively calm markets, and sent stocks tumbling to three-week lows.
The S&P 500, a broader measure of stocks, fell 1.16 percent, to 2,689.86. Big banks led the decline, with JPMorgan Chase off 4.7 percent, to $105.93.
The prospect of another European debt crisis — following multiple blowups in Greece, Italy and Spain this decade — sent investors rushing to the relative safety of US debt.
“The recent Italian revelation not only exposes the vulnerability of the eurozone economy, but the flawed construction of the eurozone itself,” Jack Ablin, chief investment officer at Cresset Wealth Advisors, said in a statement. kdugan@nypost.com