Italy: What after the populists?
We believe that the present Italian government ( we will call it "populist") will fail, because: Italy needs a policy to boost supply, not to stimulate demand; The fiscal deficit will be larg er than that announced, and interest rates on the public debt will therefore rise further; This will make the banks' situation even worse; Moreover, as the global environment deteriorates and Italy's supply problems are not corrected, Italy will probably have very low growth in 2018 and 2019, leading to a rise in unemployment. This could lead to a rejection of the "populist" coalition by public opinion, but what would be the political authority that would follow this coalition if indeed it were to fail?