The heightened uncertainty over whether Italy will repay its debts and whether it will remain a member of the eurozone has led to a sell-off in securities. Our chief economist Gerhard Winzer gives an overview.
The economic environment for Italy remains challenging. The fundamental problem is the low economic growth. Although the composition of the future government is still unclear, the party programs imply a persistent reform deadlock.
Earlier this week, we convened the last Investment Committee of 2017. The general risk appetite of the team has not changed vis-à-vis the previous month (from 78.85 percent to 79 percent on our 0 – 100 percent scale). The team continues to see the future optimistically, with a resulting “risk on” stance.
This week we held our monthly Investment Committee meeting. Although only little has changed with regard to the overall economic picture, we were having a few interesting discussions that we would now like to share with you.
While banks are required to hold sufficient amounts of senior capital to be used for restructuring in the event of a bail-in where equity and junior debt do not suffice, there are still too many loopholes for political decisions on a national and European level that thwart the idea of the no-bail-out scenario for taxpayers.
On Sunday 4 December Italy will be holding a referendum on an amendment to the constitution. This is relevant particularly because in case of a rejection, the political uncertainty would increase.