Europe hit by re­newed po­lit­i­cal in­sta­bil­ity

Po­lit­i­cal tur­moil in Italy height­ens euro break up fears

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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)

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