Italy is now in a complex situation; none of the coalitions are able to form a government with a majority in the Senate. A minority government led by Pier Luigi Bersani is a plausible scenario, but it seems very likely that such a minority government would have a short life.
A broad Bersani-Berlusconi government seems to be the most realistic option. This would probably be short-lived too; its main contribution could be a reform pause. New elections, which might not be called before the new president has taken over office, are unlikely to take place before September.
It is our assessment that it will not be a disaster if a new government is unable to undertake new reforms for a while. What is important is that a new government consucts itself in such a way that investors can remain confident that the ECB’s OMT programme will remain in place.
However, in the current situation, the process of asking for help and agreeing on the content of a Memorandum of Understanding could prove lengthy and complicated.If Italy were to need help there is a real risk that while it engages with the EU in lengthy discussions, the debt crisis could return with a vengeance.
To Read the Entire Report Please Click on the pdf File Below.