Italy far-right win spooks markets with euro falling to 20 year low

Berlin/ Paris/Beijing, Sep 26 (EFE).- Italy’s general election results — which have handed far-right Giorgia Meloni a clear mandate to govern — have spooked markets sending the euro tumbling and reactions from the European Union and other world powers who have warned of the need to maintain positive relations.

The euro hit a new 20-year low on Monday after Italy’s swing to the far-right following the jubilant victory of a coalition formed by Brothers of Italy (FdI), Liga and Forza Italia (FI) under Meloni’s helm.

At its lowest, the euro traded at $ 0.9551, although it bounced back just after 08:00 GMT when it was trading at $0.9674.

“The EU and the Eurozone are in for a rough ride: not only is Europe suffering from a veritable energy crisis, but now there is also a historic victory for the right-wing in Italy,” VP Bank chief economist Thomas Gitzel said in an article published Monday.

“The verdict of the financial markets on the Italian election is already clear: the thumbs are being lowered,” Gitzel added. “The euro continues to be punished and is trading below 0.97 against the US dollar on the morning after the election.”

The economist warned that the energy crisis, the risks of recession and Italy’s right-wing victory “bury hopes for a rapid recovery of the euro.”

French prime minister, Élisabeth Borne, on Monday, echoed the concerns European Commission president Ursula Von der Leyen voiced last week ahead of the elections in Italy where she warned all countries in the bloc had to respect the union’s values and safeguard human rights.

“We will be vigilant,” Borne said in an interview with BFM TV.

“It is a human rights value and the respect of others, namely the right to have access to abortion, should be upheld by all,” she added.

Von der Leyen prompted the fury of Italian voters last week when she said the bloc had the necessary tools should the election results take a “difficult direction.”

Borne defended the commission chief saying that the president of the Commission was exerting her role as EC president when she issued the statement.

“I am not going to comment on the democratic choice of the Italian people,” she replied when asked about the results of the elections which have handed Meloni’s party, Brothers of Italy, 26% of the ballot.

Marine Le Pen, leader of the far-right National Rally, however, was quick to welcome Meloni’s win saying that “the Italian people have decided to retake their destiny by electing a patriotic and sovereign government.”

Le Pen congratulated both Meloni and Matteo Salvini, leader of the right-wing Lega party and with whom Meloni will have to govern, for “having resisted the threats of an undemocratic and arrogant EU by clinching this great victory”.

The first hurdle to be overcome will be the looming European budgets which require member states to submit their draft budgets to the EC by October 15.

Although former prime minister Mario Draghi’s draft budget, which was approved by parliament in early April, is expected to be submitted without major changes, the new coalition government will have to adjust its macroeconomic outlook which in the Spring projected a growth of 2.4% in 2023, a deficit of 3.9% of GDP and debt of just over 140% of GDP.

Meloni’s cabinet will face this first challenge and will have to do some number crunching at speed to meet the tight deadlines to allow for the EU to approve the bloc’s Budgetary Plan before the end of the year.

Meanwhile, leading reactions from Asia, China said it hoped to continue maintaining a pragmatic relationship.

“We hope that the new Italian government will continue to maintain a positive and pragmatic policy towards China and work with China to deepen bilateral relations and people-to-people exchanges in various fields,” foreign spokesman Wang Wenbin told reporters at a Monday briefing.

“In this way, both countries and their peoples will be able to benefit,” he said.EFE