In a strange turn of events, Greece stopped being the ‘black sheep’ of the European Union last week, the role going to Italy.
The country is under a long period of political turmoil and uncertainty, which culminated to the Italian President, President Sergio Mattarella’s decision to veto the populist coalition’s choice of finance minister. Instead of a compromise the left-populist Five Star Movement and the right-populist League are bracing for another snap election.
As a result of this, Italy is now facing a spike in bond yields, but the aftereffect already reached Greece.
On Tuesday, the price of the 10-year bond dived, with its yield coming close to 5 percent – a level not seen since last November – to close at 4.8 percent, with a daily rise of 7.6 percent.
This was seen as an indicator of the way political developments in Italy might play out against the Greek government’s plan to go forward with a ‘clean exit’ from the bailout program in August.
Analysts expect the cost of borrowing to soar again for Greece, which is always an easy target when the eurozone hits a snag.
