Nouriel Roubini sees 'very little reason to think' Italy’s recent political crisis is a one-off event — and investors are watching closely

italy giuseppe conte government

  • Italy’s elections have rekindled fears of European disintegration as populist parties rise to power, sending bond yields to their highest levels since 2012, the height of the euro zone crisis. 
  • NYU economist Nouriel Roubini worries “the country could increasingly be tempted to abandon the single currency.”
  • “There is little reason to think that the current crisis is a one-off event,” Roubini writes in a Project Syndicate opinion piece. 
  • Billionaire investor George Soros warns in his own op-ed that the European Union should be careful not to try to “teach Italy a lesson” by imposing more restrictive budget rules. 

Italy’s latest bout of financial turmoil, caused by a political shift toward anti-euro forces within the country in recent elections, is unlikely to go away any time soon, according to New York University’s Nouriel Roubini.

The political winds have caused turbulence in financial markets, sending Italian bond yields to their highest levels since the crisis-ridden year 2012 and reigniting investor concerns about long-term unity within the eurozone. Investors have also pared back expectations for even the most modest shift toward monetary tightening from the European Central Bank. 

“Financial markets have finally woken up to the fact that Italy could soon be ruled by a populist government with designs to take the country out of the eurozone,” Nouriel Roubini, professor of economics and international business at New York University’s Stern School of Business, said in an op-ed published in Project Syndicate. “Given Italy’s tepid economic performance since adopting the single currency a generation ago, there is little reason to think that the current crisis is a one-off event.”

As the new populist coalition government is sworn in, investors are keeping their antennas up for any signs of further deterioration in support for the euro within Italy.

“We suspect that Italy will compromise and remain in the eurozone in the short run, if only to avoid the damage a full-scale rupture would cause. In the long run, however, the country could increasingly be tempted to abandon the single currency,” Roubini writes with co-author Brunello Rosa.

Billionaire investor George Soros warns in an op-ed of his own in the Italian newspaper Corriere della Sera that any attempt by the European Union to “use the occasion to teach Italy a lesson” would be counterproductive.

“If the EU follows this line, it will dig its own grave by provoking a negative response from the Italian electorate,” Soros writes.

Italy chart

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