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Forex News – Euro vulnerable as Italy grapples to form government
April 1, 2013 1:00 pmVideo
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The euro is vulnerable to troubles in the euro zone and remains near four-month lows. Market focus shifts to Italy, where the February 24-25 elections resulted in a hung parliament.
Italy has now been without a formal government for a month since general elections in February were inconclusive and no candidate was able to gain a majority of votes to become prime minister.
Meanwhile, Italy’s President, Giorgio Napolitano, is trying to break the deadlock after a failure in negotiations on Friday to form a new government.
The prospect of a prolonged period of political uncertainty in Europe’s fourth largest economy, which is also heavily indebted ,is causing concern in the currency markets, and weighing on the euro.
Italy still has a caretaker government in place, led by Mario Monti, which was in the process of adopting “urgent economic measures” in collaboration with the European Commission.
Former prime minister Silvio Berlusconi, leader of a centre-right alliance which is the second largest group in parliament, is against supporting a second technocrat government nominated by the president, and prefers a grand coalition government. However, the centre-left Democrats, who have a majority in the lower house but not the senate, rejected Mr Berlusconi’s proposal.
President Napolitano’s mandate ends on May 15. Italy’s head of state has the constitutional powers to dissolve parliament and call elections but he cannot do so in the last six months of his mandate. Parliament and regional representatives are to meet on April 15 to start the process of electing the next president.
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