Policy Briefs

C.Bastasin, L. Bini Smaghi, M. Messori, S. Micossi, F. Saccomanni, G.Toniolo – A HISTORICAL COMPROMISE ON ITALY’S FINANCIAL SUSTAINABILITY

Before the British referendum, political risks were already increasing across the euro area. They now arguably represent the most serious challenge to the stability of the common currency in the next 18 months. For quite some time now, government weakness in several countries and uncertain electoral outcomes in others, such as the recent Spanish election results, have made financial investors extremely sensitive to institutional and political developments down the road. While it is too early to credibly forecast the full economic, social, and political impact of Brexit, it is safe to say that market volatility will increase, impacting investor, consumer, and even electoral behavior in other EU countries.

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