Draghi’s success with stabilizing the euro could be damaged due to his own conduct as the Governor of the Bank of Italy. During his reign, 2006-2011, an Italian bank named Monte dei Paschi de Siena got involved in a corruption and derivatives scandal. The case is somewhat complex and is still being investigated in Italy.
The case isn’t discussed only in the economic and criminal sections, but also in the political ones. Italians go to the polls towards the end of the month. While the left bloc of Bersani is leading, current PM Mario Monti and former PM Silvio Berlusconi are also looking for voter support, as well as many other candidates.
* This article is part of the February 2013 monthly forex report. You can download the full report by joining the newsletter in the form below.
Corruption is one of the issues in the elections and criticizing the BOI’s role in failing to realize the situation in time has been common in all parts of the Italian political scene.
The case is likely to gain more traction during February, towards the elections, and Draghi could find himself spending time defending his past actions rather than focusing on his current role as President of the ECB. This could weigh on the euro.
Regarding the elections, the political risk is mainly if the new parliament is deeply split and no government could be formed. However, once a new government is formed, it is hard to believe that it will take any radical steps that step away from the current policy. The most favorable outcome for the markets is that the current PM, Mario Monti, will hold on to his post and continue the reforms. Yet also Bersani and Berlusconi are not likely to enforce a big change in policy, even if the campaign rhetoric could sound different.
The only force that has a totally different way of thinking is the 5 Star Movement led by former comedian Beppe Grillo. The party leads an anti-politician, anti-corruption stance, and Grillo expressed a thought about taking Italy out of the euro-zone.
* This article is part of the February 2013 monthly forex report. You can download the full report by joining the newsletter in the form below.
The party gained traction a few months ago, when the situation was worse, and reached second place in opinion polls. Yet since then, the party fell in the polls. It could be a loud and effective opposition, especially regarding corruption, but it is very far from participating In power and changing the general course that is in line with the European Union.
