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The dangers of Italy's deadlock

Wednesday, April 10, 2013 - 02:15

Apr.10 - Protests are staged in Italy as concern over the political deadlock there mounts. Ciara Sutton asks how long will investors give Italy and what are the likely outcomes.

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Italy's political stalemate is getting a little...stale. The country's leaders still can't work out how to form a government, more than forty days after an inconclusive election. They're locked away trying to reach a deal. But the anti-establishment Five-Star movement, for one, has had enough of waiting. It took its protest to parliament frustrated by the political stagnation. And they're not the only ones losing patience. CMC Market's Michael Hewson. (SOUNDBITE) (English) MICHAEL HEWSON, SAYING: "At some point we're going to see the markets get a little bit jittery. We're not there yet, but that's simply because there are other matters that are more pressing like Slovenia, like Cyprus and like the Greece bank recapitalisation. At some point markets will start to refocus back on Italy, especially if the Italian economic data continues to deteriorate as we saw again this morning with the industrial production data." Pier Luigi Bersani met his rival Silvio Berlusconi on Tuesday. But the centre-left and centre-right party leaders can't seem to agree on the next president. And they don't have long. The current one, Giorgio Napolitano, leaves in a month - there'll be no-one to dissolve parliament or call new elections after he's gone. Agreeing on a government is proving equally tricky. The two rivals have seemed more cordial in recent days but frustration is mounting among voters. They've already expressed that by voting for stand-up comic Beppe Grillo who leads the Five-Star Movement. It's feared more alternative candidates could emerge if the current ones fail to find a solution soon. Dominic Johnson from Somerset Capital Management says that's when investors will start to worry. (SOUNDBITE) (English) DOMINIC JOHNSON, SAYING: "I think what's happening in Italy will happen elsewhere in Europe. You're seeing it in the UK, with fringe parties like UKIP flourishing and you're seeing it in France with extreme left and extreme right parties. In Germany you've got the pirate party. This is the beginning and most obvious visual demonstration of the severe political problems we're going to face over the next 5 to 10 years." For now the markets remain unfazed. Italy's borrowing costs are back at pre-election levels. But that's only because Italy is out of the euro zone focus - that may not last for much longer.

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The dangers of Italy's deadlock

Wednesday, April 10, 2013 - 02:15