Italian crisis could be Trump's baptism by fire
Washington
IT would be tempting for Donald Trump's incoming administration to dismiss Prime Minister Matteo Renzi's resounding defeat in Sunday's constitutional referendum as an inconsequential vote on a distant shore. This would be a big mistake. The Italian crisis is a problem for the US as well as Europe.
Italy is a large economy of systemic importance. Its poor fundamentals make it ill-prepared to weather prolonged political instability. Italy has the potential to roil financial markets and derail the global economic recovery. It is the euro area's third-largest member country, with a US$4trillion banking system. It is the world's third-largest government bond market, with issuance exceeding US$2.5 trillion. Italy's economic well-being is essential for the euro's long-term survival, but it is too big for Europe to save in the event of a full-blown crisis.
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes