Armageddon in 5 days?

Not very encouraged about Italy frankly. Politics remain the age-old problem in Italy. The election could hold the whip hand for major problems ahead, not just for Italy, but for Eurozone and global financial stability. Italy is the Godzilla of event risk for the Eurozone. The bond market is a behemoth. The ECB have done as much as they can to prop up confidence for bond market investors, but any wobble in confidence could bring the whole house of cards crashing down around the market’s ears. Quite frankly, the EU, IMF and the ECB do not have the resources to keep this monster intact if the political situation starts to fragment, or the market begins to lose faith in the government ever being able to stabilise the debt situation. What we need to see is a return of a non-partisan, technocratic government like we had under Giuliano Amato in the early 1990s to get the country back into better budgetary shape. The problem with that will be years of enforced economic austerity. It is a corset that the electorate refuses to wear any more. With or with economic austerity the economic still looks doomed to years of sub-par growth and continuing recession risk. It is just a matter of political degree. The only reason the key 10-year Italy-German yield spread has compressed so aggressively in the last six months is the belief that the ECB will be the lender of last resort to Italy in a crisis and  that the tail risk of Eurozone risk has finally receded. If Italy goes pear shaped, it will the beginning of the endgame for the Eurozone. It is not over yet