Why it Matters: Italy’s latest political crisis could result in EU turbulence

We have been watching closely the political crisis in Italy these past few weeks which resulted in Prime Minister Mario Draghi resigning. Italian politics are always complex and at times bewildering. There have been 66 changes of government in Italy since the end of World War II. But this change could be a shock to not only Italy but to the rest of the European Union.

A snap election is to be held on September 25th but polls today show the Brothers of Italy Party with a clear majority. The right-wing party, whose name comes from the Italian national anthem, is led Giorgia Meloni. They have formed a coalition with other right-of-center parties including Forza Italia (led by former Prime Minister Silvio Berlusconi) and the Italian League (led by Matteo Salvini) and the populist Five Star Movement. Together, they would form what would be seen as the most conservative - both fiscally and socially — political party in the EU.

If elected, markets should expect a much more disruptive Italy within the EU governance structure, challenging the EU rules over budget and other issues including migration and social issues (including gay rights and abortion). Most investors have become worried Italy carries too much debt now. A Brothers of Italy coalition would not make debt reduction a priority.

If elected, Meloni would become Italy’s first female premier. She has made clear, however, that Italy will continue to support Ukraine in the war effort against Russia.

We will be tracking this election closely and sharing our analysis going forward. Here are the latest polls: