Italy went to the polls on the 24th and 25th of February to choose 630 members of the Chamber of Deputies and 315 elective members of the Senate. To no-one’s surprise the result was confused: Pier Luigi Barsani’s Democratic Party took the most seats and the biggest share of the popular vote, but the real winners were the Five Star Movement, led by Beppe Grillo, a former comedian.
The polling stations had barely closed before the new legislature was voting to end the austerity of the previous Italian Government: this naturally sent European stock markets into a tailspin and sparked predictions that a continued deadlock could only prolong Italy’s recession.
It is hard to see countries such as Greece continuing with an austerity programme if Italy abandons hers – especially as Greek pharmacies run short of medicines, blaming a lack of cash to pay suppliers. As ever, the crisis and uncertainty in Europe rumbles on as the Germans continue to wonder whether they really need the problems of their Southern colleagues.
In the UK, the ‘big news at the end of the month’ trend continued, with the Eastleigh by-election being held on February 28th. It was seen an acid test of the Conservative party’s popularity: bad news then, as they slumped into third behind the Liberal Democrats and UKIP. With the UK having lost its AAA rating from Moody’s earlier in the month and a difficult Budget to look forward to next month, David Cameron must have been scanning the horizon for good news. As shops on the UK High Street closed at the rate of twenty a day and business confidence reached an all-time low, it was in short supply…
UK
With his party trailing Labour by 12% in the polls and the UK losing its AAA rating in mid-month, February was a depressing month for David Cameron.
Whilst the UK – for now – retains its coveted AAA rating from the other ratings agencies (S&P and Fitch) the downgrade from Moody’s immediately pushed up the cost of the Government’s borrowing and led to renewed criticism of Chancellor George Osborne. Interestingly, the UK stock market reacted favourably to the news, expecting that it would prompt another round of Quantitative Easing to stimulate the economy. The FTSE 100 index finished the month at 6,361 – a rise of 1%. But there were plenty of world markets that fell in February.
The £ fell to a two year low on news of Moody’s downgrade and what was seen as an increasingly gloomy economic outlook. It touched $1.51 – which will hopefully mean good news for the UK tourist industry this summer.
