Italy is known for its magnificent scenery, extraordinary art, great food and terrific wine. It’s also known for its stagnant economy and dysfunctional politics.
Government debt is 132% of GDP (vs. around 100% and growing in the U.S.) and the European Commission was actually thrilled to see GDP grow at 1% this year, which they called an “acceleration.” (From what, you might ask.)
The country has had more than 65 governments in the 73 years since World War II ended. Attempts to form the latest one started a mini-crisis early this week.
Sergio Matarella, the country’s president—a largely ceremonial position—refused to accept a finance minister picked by the prime minister in waiting, Giuseppe Conte, who had been chosen after months of negotiations by a coalition of the far-right, anti-immigrant League and the populist 5-Star party. The two anti-Establishment parties pulled off a stunning upset when they won 50% of the vote in March’s parliamentary elections.
Matarella’s move threw markets into turmoil Monday, even though it delayed the formation of a profoundly anti-European Union government that actually might begin to move Italy out of the European Union and euro (call it “Itexit”).
On Tuesday, the Dow Jones Industrial Average plunged nearly 400 points and the Standard & Poor’s 500 index lost more than 1% of its value.
But then something strange happened.