A long autumn marked by perfect storm of energy and runaway inflation to which the specter of recession, the possibility of an economic downgrade by rating agencies and, finally, an increase in financial speculation against public debt must be added. Italy, after the vote of 25 September, will be on the roller coaster and if it manages to obtain an absolute majority, the center-right of the government, and the premier in pectore Giorgia Meloni, they will have to face a series of all-out challenges from the very first weeks.
We had already realized this on Inside Over, advocating the idea that in order to dispel the dark clouds of speculation and the return in force of the “hawks” of finance and EU institutions to Italy, a probable Meloni government should come up with an ambitious plan to contain the costs of the energy crisis and bills , dedicating a substantial part of the economic-financial effort of the first financial maneuver to it. However massive the weight of the internal energy crisis is only one of the boulders that the Draghi government in its terminal phase and the next executive that the center-right aspires to lead will have to face in the coming weeks.
At the end of August, we remember it, the Financial Times accounted for the accumulation of the largest speculative stake against Italy in the last decade. September 2022 will be like September 1992, the month of the very hard speculative attack of George Soros against the lira? Under certain conditions, a powerful bearish wave on Rome’s financial instruments could happen today not so much due to the electoral outcome but rather due to the accumulation of a series of unfavorable dynamics for Italy: in the first place the German recession, that the Bundesbank expects to last for the whole of 2023, it will certainly impact the productive heart of Northern Italy; secondly, the downgrade of the country’s outlook and of the main energy and financial companies by the major rating agencies, led by Moody’s, is certainly orienting investors; finally, the restrictive policies of the European Central Bank and the end of quantitative easing they increase the cost of servicing a debt on which the sword of Damocles of the 38 billion euros of speculation appears like a boulder.
“Italy’s welcome gift to Meloni will be a worse economic prospect,” he wrote Bloomberg on 22 September, to then open in today’s edition with a comment by an Italian analyst, Alessandra Migliaccio, historic head of the newspaper, according to which a statement by the center-right can “scare the markets”. Given the accumulation of negative bets and contexts unfavorable to the country system, it appears difficult to find a direct correspondence between a possible affirmation of a right that for three quarters of its components (Lega, Forza Italia, centristi) was already firmly alongside by Mario Draghi before the government crisis triggered in July by Giuseppe Conte and a worsening of the conditions of the country-system. Especially considering the fact that a possible right-wing majority will face the first few months challenges of the energy emergency and its roughness. However, it is undoubted to underline that the economic conditions that the conservative coalition could find itself inheriting are likely to be of progressive deterioration.
And from this perspective, the debt challenge should not be forgotten. That in addition to speculation will have to face the game of the renegotiation of many purchases in which, from 2015 onwards, the ECB has had a decisive role with the Public Sector Purchase Program (PSP) and the Pandemic Emergence Purchase Program (Pepp) promoted by Mario Draghi and Christine Lagarde. “Government bonds in circulation are worth 2,229 billion and over 10% of this figure must be managed in the first 15 months of the next legislature”, reports a report from the Unimpresa Study Center cited by The print, who in his analysis adds the timing of the first obstacles for Rome for the post-elections: “the calendar of the Ministry of Economy foresees a BTP auction on Tuesday 27th and a Bot auction on the 28th”, on the same days in which “the outgoing government will in fact have to publish the new update note” to the Economics and Finance Document in which it recession spectrum could become an estimate put in black and white.
As the director of Dire Agency, Nicola Perrone, “For Giorgia Meloni the truest theme will not be to win (or overwhelm) but to field a government capable of governing and solving the big problems that are already on the horizon”. There is the possibility that the economic situation destined to break out from October will create the conditions for a perfect storm. And a victorious executive in the elections can face a decisive challenge in the first weeks of their mandate. With a fundamental caveat: navigating firmly in the energy storm, grounding cost containment strategies and starting once the boat is safe, the reforms envisaged by the electoral program can allow, after autumn and overcoming the winter, years of navigation quieter. The recession is fighting with responsibility, just like any “gufata” of the giants of rating and international finance who may soon find themselves faced with the need to prefer the high-quality returns guaranteed by an Italy too big to fail rather than sink the blade of speculation on the country. To which Rome has, thanks to a resistant productive fabric and still solid private savings, the weapons to cope with. Regardless of the color of the current government.