FRANKFURT, Germany – Italy’s political turmoil is sending a wave of concern through Europe’s 19-country currency union as tremors are felt in financial markets.
A major reason for the concern is that Italy’s populist parties, the 5-Star Movement and the League, have questioned the eurozone’s rules controlling debt and spending. That means Italy would have trouble accessing any of the new financial backstops that European officials put up to prevent a repeat of their debt crisis of 2010-2012.
Italy’s two-year bonds fell sharply in price Tuesday, indicating that investors see Italy as riskier than before efforts to form a government there collapsed on Sunday.
The vice president of the European Central Bank, Vitor Costancio, issued a reminder that emergency assistance programs require countries with troubled finances to stick to agreements on government spending.