European shares are firmly in the red Tuesday, led lower by uncertainty over Italy’s political future as a second election looks increasingly likely after Italy’s President vetoed the potential coalitions choice of economy minister.
Spanish shares are also weaker as PM Rajoy faces a formal confidence vote in Parliament, Friday.
By 1425 BST, the EUROSTOXX 600 was down 1.30% while the EUROSTOXX 50 lost 1.44%. Regional bourses were uniformly lower too. The German DAX sank 1.22%, the French CAC fell 1.27%, the Spanish IBEX was 2.55% lower and the Italian MIB slumped 2.50%.
Italian political woes
After an inconclusive March election left the country’s political parties scrambling to find coalition partners, a potential partnership between 5-Star and the League party had been working towards forming a ruling government.
However, uncertainty began to emerge when the two parties shared plans and potential names of their cabinet. The coalition talks ended with the country’s President’s decision to veto their proposed economy minister.
Now, President Sergio Mattarella has asked ex IMF official Carlo Cottarelli, to try and form an Italian Government. However, if this last-ditch effort fails, its likely Italians will have to return to the polls in a bid to find greater agreement on who will run their country.
Amid the uncertainty, Italian banks have lost a lot of ground as investors opt to sell Italian stocks as they wait-and-see what will happen there.
UniCredit shares slid 4.59% to €14.12, Intesa Sanpaolo shares dropped 4.07% to €2.45, Italy’s UBI bank stock fell 3.47% to €3.31 and BBER Banca shares lost 3.83% to €4.14.
Spanish politics weighs
Also weighing heavily on European indices Tuesday afternoon, is news that Spain’s PM Mariano Rajoy is facing a vote of confidence and the possibility of a new election if the vote proves unsuccessful for him.
Highlighting the uncertainty there, Spanish stocks are in the red. Banco Santander shares slumped 7.05% to trade at £404.75, Banco Sabadell shares were down 5.60% at €1.51% and BBVA shares were 4.68% lower at €5.92.