Forex Flash: Political shakeup in Italy – Deutsche Bank

In Italy, ex-PM Berlusconi attracted some weekend headlines as he offered a series of tax cuts including repealing and refunding the controversial real estate tax which was imposed by Monti last year. “As the countdown to 24th-25th elections begin, our European economists highlight that although current opinion polls still suggest a compromise between the center-left coalition and Monti's center is the most likely post-election outcome.” predicts the Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank.

Current poling trends have significantly chipped away at the advantage of the center-left over ex-PM Berlusconi's center-right. They note that rising risk political uncertainty could erode Italy's current reformist drive and the potential tail-risk of a hung parliament could negatively affect market confidence in the short term.