Following Donald's Trumps election victory bank shares around the globe have surged, with one exception Italian financial sector. In the last month alone the share price of Italy’s largest financial institution, Unicredit, has plummeted over 15%. The country’s second largest lender Intesa Sanpaolo has experienced a 10% fall in its market cap.
Italy’s problems don’t stop there, they are also facing a debt and political crisis which are all coming to a head at the same time.
The Italian economy has been in reverse ever since it joined the euro in 1999 and in real terms the size of the economy has shrunk by 10%. Over the same period government debt has exploded to 135% of Gross National Product, the highest percentage of any European economy except for Greece. Worryingly, yields on the country’s debt are rising fast as investors begin to flee the Italian debt market.
The Italians go to the polls on the December the 4th to decide if regional powers should return to the country’s lower house. Matteo Renzi, the country’s prime minister has vowed to step down if the referendum fails. Renzi’s main opposition comes from Beppo Grillo, a former comedian and leader of the Five Star Movement, coalition calling for the country to abandon the euro. With the populism on the rise we may be on the verge of another political upset.