Europe hit by renewed political instability
Political turmoil in Italy heightens euro break up fears
Italian two-year bond yield above 1% for first time since 2014
THE MARKET may have felt it had cleared the major political threats facing Europe in 2017 when the result of German and, in particular, French elections helped restore some confidence to the European project.
However, the issue of Italy has returned to haunt investors and with it the renewed threat of a break-up of the eurozone.
The turmoil in Italy, where efforts by populist parties to form a coalition government have collapsed, raises the spectre of a repeat election which could be fought on an anti-EU, anti-EU platform and ultimately become a referendum on membership of the euro.
This has put pressure on the single currency and sent yields on Italian government bonds spiralling higher.
At the same time Spanish prime minister Mariano Rajoy is facing a vote of no confidence in his leadership on 1 June, threatening further instability. (TS)