The elections for the President of the Republic do not worry the markets too much and will not inflame the spread. This is the forecast of S&P, which arrives while the ECB, which keeps an eye on the Italian differential, reassures: even with a less expansive monetary policy, there will be room for intervention to ‘cool down’ any situations of tension. “I don’t see a big increase in the spread ahead of the presidential elections in Italy, I think the differential will stay more or less at current levels,” said Sylvain Broyer, chief economist for Europe at S&P Global Ratings, today during a press conference. on the Italian economy. Words that come after some ‘warmer’ months that saw the spread return above 130 (131 closing today) from below 100, where it was until summer. Right today, the three-year BTP sold at auction by the Treasury is back to having a positive return (0.14% from -0.10%) for the first time since October 2020.
Of course, for S&P the priorities of Italian politics must be “not to jeopardize the current strong confidence of businesses and families”, a theme strongly linked to low political litigation and a compactness of the parties on the reforms to be made. But “our basic hypothesis – says Broyer – is that there is not a great incentive to go to early elections, we are quite confident in a situation of continuity”. In short, trust in Mario Draghi’s permanence in a top position. For S&P, the “modest widening” of the spread, rather than the twisting of the policy on the Quirinale, has to do with the reduction of the role of the ECB in buying debt, which led Frankfurt to finance the entire Italian deficit in 2020 and beyond 90% in 2021. Frankfurt, at its meeting of 16 December 2021, announced a step backwards in the face of strengthening inflation.
But with nuances that do not put the Italian accounts and the spread at risk, according to S&P. In the Economic Bulletin, the ECB dedicates a few lines to spreads, a mirror of the cost of governments to finance themselves on the markets. He notes that, since October, “they have remained relatively stable in Portugal and Spain, but have increased by around 15 basis points in Italy”. But then he reiterates that, even if the Pepp pandemic program ends in March, the euro central banks will reinvest the securities they hold in their portfolio “at least until the end of 2024” (a one-year extension) and “in the event of further fragmentation of the market related to the pandemic, reinvestments will be able to be adjusted flexibly over time, between the various asset classes and the various countries at any time “. Intervention margins which, according to S&P, will allow the ECB to extinguish any flare-ups in yields. The decision on reinvestments – explains Broyer – is the key decision, which will have a stabilizing impact “.