The electoral law is going down well with the markets

There is still quite some time to go, but the upcoming general election in Italy is beginning to feature in the analyses of economists and market observers keen to gauge the level of political uncertainty in the country following five years of Meloni’s government. And the main issue, of course, is the new electoral law. According to economist Lorenzo Codogno, who teaches at the London School of Economics and is the founder of LC Macro Advisors, assuming the government secures approval in the Senate soon – likely followed by a final vote of confidence in the Chamber of Deputies – the new law is balanced and should increase the stability of any future government, guaranteeing a substantial bonus of parliamentary seats to the coalition heading the list. However, he adds, due to various factors – above all the rise of Vannacci’s Futuro Nazionale – political uncertainty is mounting and the outcome of the 2027 general election remains very much up in the air.

So, in the eyes of those accustomed to anticipating potential upheavals in political stability – which is crucial for a country that needs to place public debt with investors – the General represents a source of uncertainty. Just a few months ago, the economist argues, it seemed almost certain that the centre-right would win the upcoming elections. There was a considerable gap in the polls and, more importantly, the opposition was divided. But the significant political defeat in the referendum on the justice system, followed by mixed results in the local elections and, above all, the rise of Vannacci, have eroded support for the governing majority to such an extent that the outcome could go the other way. Is a heated August on the cards? It would come as no surprise. Codogno cites, by way of example, the 2019 Papeete crisis, when there was a political collapse after Minister Matteo Salvini pulled the plug on the governing coalition of which he was a part, to illustrate that anything can happen. The bottom line is that, on the markets, Italy’s political uncertainty is once again a key issue.