29th April 2013
The re-election of Italy’s President could be a more important event than the appointment of a new Prime Minister argues Gilles Guibout, European equity portfolio manager at AXA Investment Managers.
The fund manager says that Italy may even be moving closer to a presidential system.
“Arguably more important than the appointment of Enrico Letta as the new Italian Prime Minister, is the re-election of 87 year old Giorgio Napolitano for a second presidential term. This was the real surprise of last week. Reluctantly accepting this position and agreeing to serve a second term has given Giorgio Napolitano a new status and great authority as President. This could be a major turning point towards a more presidential system.”
He suggests that the Government may last longer than expected due to fears among politicians about the Five Star Movement led by Beppe Grillo.
“These events show how the situation in which the country finds itself in is complex, but have eventually led to the appointment of a coalition government tasked with carrying out specific structural reforms including a change to Italy’s much criticised electoral laws. Everyone is still shocked by the degree of success achieved by the anti-establishment Five Star Movement led by Beppe Grillo which is now the main opposition party,” he says.
“Fear of this alternative may mean that the new government has a longer life expectancy than you would guess from the many observers who are already predicting new elections in the near future.Such a scenario would bring some stability and may potentially lead to a normalisation of the risk premium, allowing the Italian stock market to appreciate.”