The latest Italian election polls that have come out over the last few weeks continue to warn of the geopolitical instability that will quite possibly emerge from the third largest economy in Europe and a G7 member. These recent Italian surveys showed that no party will score an outright majority victory.

The Forza Italy party and two allies of the right block led by former Premier Silvio Berlusconi are holding a lead with approximately 34 percent likely. Five Star Movement enjoys a close second block support (and is the leading single party) with 27 percent projected. Today’s sitting government the Democratic Party receives 24 percent support at this point.

The most likely scenario remains that there will be no clear winner. This outcome or one of the two leading blocks winning also pose significant risks to Italy’s financial reforms and economy. In a country (important to the world markets) still rife with banking and debt problems, it reminds why you need to invest in gold. Research shows that gold offers insurance and protection during market turbulence. This is one of the great reasons for why a gold IRA should be part of your retirement strategy.

Italian Elections To Take Place in Early March

These critical Italian elections were recently called by the Italian president. He dissolved the national parliament at the end of December 2017. At the same time, he set the poll date for March 4th. Analysts had been expecting the elections to take place in early March for several months. What none of them have been able to predict is how a single party could actually win this election. Two of these potential scenarios include either a Berlusconi alliance victory or a Five Star Movement win.

What Will A Berlusconi Alliance Victory Mean?

Berlusconi’s election platform is differentiated between that of his own party Forza Italia and the Northern League his main ally. He has promised if they win to double the amount of minimum monthly pensions to $1,200 (or 1,000 euros). Besides this, his platform includes boosting controls for immigration, cutting taxes, reworking pension reforms that increased the age of retirement, and negotiating less restraints from the EU.

The current Italian Economy Minister Pier Carlo Padoan has warned that the tax policies of both Berlusconi and his allies are not sustainable. Padoan criticized the Northern League’s hoped for 15 percent flat tax rate as not practical. He calls the Berlusconi 20 percent desired rate “less unsustainable.”

Other members of the financially responsible current ruling government agree with this concern about increasing government expenses for pensions all the while cutting out a few taxes. Member of the Democratic Party government Carlo Calenda warns that this will eliminate all progress to balance the finances and will create a perilous scenario for Italy’s financial stability. He voiced his concerns for how international investors will view this with:

“The image that we will give is that we are no longer ready to face the challenge coming from the reality of our financial situation, and I guess that for the markets this will be a very dangerous approach. This will give us less access to the markets and will bring a lot of entrepreneurs, foreign entrepreneurs that want to invest in Italy, to reconsider investments.”

The other problematic area for the Berlusconi alliance is his sister party’s view of the euro. The leader of the Northern League Matteo Salvani reveals back and forth intentions on the single currency and Italy’s participation. While he has made fun with the idea of a referendum that rival parties endorse, only as recently as the past weeks he promised he would correct the mistake of the euro single currency. Berlusconi has moved to address this leaving the euro concern with his remarks on Tuesday:

“Salvini is no longer of the idea that we should leave the euro. He has understood that it would be unsustainable for our economy.”

While Berlusconi vocally supports keeping the Euro, a great number of Italians do not. Instead, they hold its continued restricting use responsible for the current malaise in the Italian economy.

Five Star Movement Victory Would Be Uncharted Territory for Italy

The second potential scenario is that the Five Star Movement wins the largest share of the vote. There is a lot of debate over how they could form a government or if they would try to run a minority government. None of these scenarios would be good for Italy’s finances and stability. One of the hallmarks of their policies is a potential referendum on continued Euro membership.

Member of ruling government Calenda sees this as a worse scenario because it creates tremendous instability. When he was queried on the economic results of Five Star winning and forming a government, he stated his concerns that the majority of their ideas are not at all feasible, with:

it is “very difficult to say because their program is even less clear than the one of the center right. I think that their proposal is mainly an escape from reality and to escape from reality in the context of our financial situation that remains difficult is a potential disaster.”

One of the policies that he refers to concerns their desire to create a universal basic income for all citizens. The other has to do with their ideas for using renewable energy to provide for all of the nation’s requirements.

No Winner Hung Parliament Scenario Likeliest of All

The unfortunate most likely result for Italy is an election on March 4th that leads to a hung parliament. The country can ill afford this. It has become at risk especially because its potential for growth is weak at best. Add to this the third biggest government debt in the world, and it is a recipe for potential disaster.

Yet the polls show exactly this type of result. The graph below reveals how close the support for all three main groups remains:

The real question is what will happen if the polls prove to be correct and there is no clear winner? While in the past, right and left parties have worked together in coalitions, the two sides have publicly and consistently declared there will not be any so-called grand coalition despite results yielding no majority winner.

Economy minister Padoan is of a different opinion though. He says that there is always the possibility for it. Regarding whether Forza Italy and the Democratic Party could come together to make such a government, he declared:

 “In a context of high uncertainty nothing can be ruled out. Such uncertainty is already being perceived. Financial markets are rather nervous it seems to me.”

Another more likely result is that current Prime Minister Gentiloni would remain in the post for up to several months while electoral reform was pursued and a second vote was arranged. This would create a prolonged period of uncertainty that would not be good for European and world markets.

Gold Protects Against Geopolitical and Market Turbulence

Markets hate this type of geopolitical uncertainty that Italy is suffering from lately. It could easily get worse before it gets better. The Italian economy is too important to Europe and to the world for its massive public debt and toxic banking debts to be allowed to take it down.

This is a good reason to hedge your retirement portfolio with gold. An Italian crisis can easily spark a negative global reaction. It reminds you of the importance of owning gold in times of financial crisis. Think about how to invest in gold today.

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