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Politics and payments unsettle euro zone

Tuesday, Feb 05, 2013 - 02:41

Feb.05 - After a few weeks of calm, the prospect of double trouble in the euro zone is making investors nervous again. Uncertainty surrounding the outcome of the Italian elections, combined with a corruption scandal in Spain have hit bond yields, and led to fears of the debt crisis reigniting. Joanna Partridge reports

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It's not exactly a battle of equals. The two key candidates in Italy's elections later this month are polls apart - Mario Monti an economist, Silvio Berlusconi a showman. The election could give current Prime Minister Monti a mandate for more reforms. Not everyone wants that. SOUNDBITE: Maria Lakin, Pensioner, saying (Italian): "It's easiest to toss a coin to see where it lands. It's very difficult." SOUNDBITE: Alfonso Bonzo, Pensioner, saying (Italian): "There's a big unknown here - realistically we no longer have faith in anyone." Berlusconi has surprised many by bouncing back, says history professor Giovanni Orsina. SOUNDBITE: Giovanni Orsina, Contemporary History Professor, Luiss University in Rome, saying (English): "Berlusconi is a remarkable character and certainly a few months back everyone believed he was utterly finished. And he has demonstrated that he is still there, he can still fight an election and that he can still get a very significant result in the elections. Also because noone else is addressing his voters, is trying to steal his voters. On the other hand I do believe it is very unlikely that Berlusconi wins the elections." It's all still to play for. And that political uncertainty has worried investors, leading to the first jitters of the year in European markets. They had seemed to ignore politics over the past few weeks, but Italian bond yields have risen again in recent days. And revelations about the trading scandal at Monte dei Paschi bank hasn't helped. And it's not just Italy which is rocking the euro zone boat Spain's Prime Minister Mariano Rajoy has been accused of receiving under the table payments. He's denied the allegations, but some have called for his resignation. And once again Spanish and Italian bond yields have moved in tandem. Will Hobbs from Barclays says he's got a close eye on developments. SOUNDBITE:Will Hobbs from Barclays, saying (English): "The political stability in both regions is extremely important to the integrity of the euro zone and how reforms, you know, the necessary reforms are implemented. For our part we haven't so far seen anything to get too worried about, we still think that in terms of the Italian elections hopefully what you get, a more likely scenario is that you get a centre-left coalition managing to get the Lower House and then with the help of Monti's party or Monti's coalition you probably manage to get Upper House control as well, so hopefully the reforms continue." Rome and Madrid's problems aren't expected to reignite the debt crisis. But they are a reminder that the euro zone isn't out of the woods yet. And the past few years have shown uncertainty can be a real enemy to recovery.

Politics and payments unsettle euro zone

Tuesday, Feb 05, 2013 - 02:41

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