Italy back in the spotlight

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The difficulties in forming a government in Italy and the prospect of a Eurocritical alliance between Lega Nord and the 5-star party have alarmed investors. Italy's likelihood of leaving the country rises sharply in May from 3.6% to 11.3%. For the eurozone as a whole, the sentix EBI Index rises to 13%, the highest level since April 2017. And there is another surprise!

The unrest surrounding the formation of the Italian government, in which the Euro-critical parties Lega and 5-Star want to merge to form an alliance, has shocked the bond markets. It is therefore not surprising that the sentix Euro Break-up Index also reflects these new euro concerns. The overall Euro zone index jumped to 13% in May, its highest level since April 2017, and the Italian sub-index more than tripled from 3.6% to 11.3%. So, the troublesome calm in the euro zone is a thing of the past.

sentix Euro Break-up Index: Headline Index Euro area and Sub-index Italy

sentix Euro Break-up Index: Headline Index Euro area and Sub-index Italy


However, a look at the contagion risk index shows that the stabilisation efforts of recent years have not been entirely in vain. This falls from over 43% to 34.3% in May despite the unrest. This surprisingly positive indication is due to the fact that the likelihood of other countries leaving the country has so far been virtually unaffected by the Italian caprioles. The Greek sub-index has risen by only about 1% and the Spanish index by only about 0.5%.

Background

The sentix Euro Breakup Index is published on a monthly basis and was launched in June 2012. Its poll is running for two days around the fourth Friday of each month. Results are regularly published on the following Tuesday morning. Survey participants may choose up to three euro-zone member states of which they think they will quit the currency union within the next twelve months. Further details on the sentix Euro Breakup Index can be found on http://ebr.sentix.de.

This month’s reading of 13.0% means that currently, this percentage of all surveyed investors expect the euro to break up within the next twelve months. The EBI has reached its high at 73% in July 2012 and touched its low at 6.3% in April, 2018.

The current poll in which about 1.000 institutional and retail investors participated was conducted from May 24th to May 26th, 2018.

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