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Italy's Presidential Elections: Uncertainty on Reform Timing

Italy is holding elections for the next president of the Republic to take place starting from 24 January 2022. This is significant as it could have implications for government stability and for Italy's reform agenda. 2022 is a key year as the government is tasked with double the goals (milestones and targets) accomplished in 2021, with a large number of measures scheduled to be legislated in the second quarter of the year. Some reform delays seem inevitable as things rarely run like clockwork, but reform momentum is important. Sustaining progress with reform legislation and implementation leading to higher growth potential could positively affect debt sustainability and in turn Italy's credit rating, currently BBB (high), Stable.

Key Highlights
-- Presidential election could lead to government instability
-- Reform delays seem inevitable
-- Draghi as president mitigates the risk of a material slowdown in the reform agenda

"Uncertainty over the Italian Presidential election as well as its implications for government stability and the reform agenda is rising. We think that 2022 is a really important year to make progress with reforms and even if Mr. Draghi is elected as President the next government should still have a good chance to legislate the reform agenda because of the importance of the NRRP," said Carlo Capuano, Vice President, Global Sovereign Ratings.