All anyone is talking about today is Italy, where stocks are getting destroyed, and borrowing costs are rising, thanks to Silvio Berlusconi’s re-entrance into politics.
Investors want to know one thing: can he win? The overwhelming conventional wisdom is that he can not. His poll numbers are very bad.
In a note that was just put out, Nomura’s geopolitical guru Alistair Newton explains why you can’t write him off so easily.
He gives four points:
- He will likely campaign on an anti-austerity but pro-EU platform which may appeal to many voters;
- He may (again) re-name and re-brand his party to try to present a fresh image;
- His media interests give him a significant promotional platform; and
- Putting to one side for the moment Beppe Grillo’s anti-establishment Movimento 5 Stelle (M5S), currently polling more strongly than the PdL, Italians look like being faced with a familiar choice between right and left (including the two main protagonists themselves, ie Messrs Berlusconi and Bersani) which has favoured the former for most of the past decade.
As such, says Newton, a plurality of the popular vote going to Berlusconi can not be totally discounted.
One additional point: Newton goes onto discuss the possibility of Mario Monti somehow retaining power, an outcome that markets would love (as markets have done great during Monti’s rule). But Monti lacks democratic legitimacy (he was never elected) and Italy may be much better off with someone who does win (Bersani) with the mandate for reform and growth.