Bond spread soars and Milan Stock Exchange plunges amid Italian government crisis
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The spread between Italy’s 10-year BTP bond and the German Bund leaped up to 239 basis points on Friday after League leader and Deputy Premier Matteo Salvini said he was pulling the plug on the government.
The spread, an important measure of Italy’s borrowing costs, closed on 209 points on Thursday.
The yield on the BTP rose from 1.53% Thursday to 1.8% on Friday. The Milan stock exchange felt the effects too, with FTSE Mib index dropping 2.3% to 20,360 points in early trading.
Bank stocks were hit particularly hard, with UBI down 5.84%, BPER losing 5,84%, MPS shedding 5.69% and Unicredit down 5.71%.
Matteo Salvini, leader of Italy’s League party, has called for a snap election, saying differences with coalition partners cannot be mended.
A failed attempt by the Five Star Movement to derail plans for a high-speed rail link showed the coalition could no longer govern, he said.
Five Star leader Luigi Di Maio said his party did not fear another election.
Salvini’s right-wing party is well ahead in opinion polls, due mainly to his stance against illegal immigration.
In last year’s election, Five Star won twice as many votes as the League, but polls suggest the proportions have been reversed.
In European elections held in May the League came top with 34% of the votes in Italy, whereas Five Star got about 17%.
