The far-right’s expected victory in Italy’s upcoming early election is increasing uncertainty over the country’s political and economic outlook. However, a new right-wing government is unlikely to diverge completely from its predecessor’s foreign and economic policies. Italy will hold an early general election on Sept. 25 after President Sergio Mattarella accepted Prime Minister Mario Draghi’s resignation and formally dissolved parliament on July 21. Draghi’s resignation, which happened after most of the parties backing his premiership withdrew their support for his government, coupled with the European Central Bank (ECB)'s same-day decision to lift its deposit rate by 50 basis points, led to a selloff in Italian bonds and stocks. The ECB also recently announced a new bond purchase scheme to tackle rising government bond spreads in the eurozone, which has somewhat tempered the rise in Italian 10-year government bond yields. However, market reactions in recent weeks signal an overall uneasiness regarding...
