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Italy once again eyed by investors as populist threat subsides

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Italy is
again on the radar of international investors after the populist threat in
the country has been put on hold.

The
country’s business elite, gathered at an annual summer lakeside meeting, are
cheering premier Giuseppe Conte’s second act. His new government has promised
to dial down the confrontation with European partners and stop flirting with
the idea of leaving the euro.

“With a new
government that looks to Europe not for confrontation but for dialogue, the
immediate reaction from markets is more confidence,” Jose Ignacio Izquierdo Saugar,
chief executive officer of Aviva Plc’s Italian unit, said in an interview
in Cernobbio, Italy. “Italy represents a good investment opportunity.”

While
leading representatives of the new government didn’t take part in the
Ambrosetti Forum, as Conte is still putting the finishing touches on his team
and program, optimism was in large supply. Financiers, focusing on the
implication for investors of a more Europe-friendly coalition, expect deals put
on hold for months to be revived as the country benefits from lower spreads and
high liquidity.

“A
government supporting pro-Europe policies drastically reduces the so-called
redenomination risk that was weighing on the valuation of Italian assets after
populists threatened to take the country out of the euro,” said Roberto
Nicastro, Europe senior adviser at New York-based private-equity firm Cerberus
Capital Management. “Cerberus is looking positively at the coming months, this
is a great opportunity that the country has to catch to attract more capital
and investments from abroad.”

Italian bond
yields touched record
lows and stocks rallied after the populist coalition of Five Star and Matteo
Salvini’s League collapsed, leading to a second pro-European Conte
administration, this time with the support of the Democratic Party. Salvini
still has polls in his favour, but his popularity is sliding just as he loses
the spotlight of a ministerial position.

Market
Opening

Under the
previous government supported by Salvini and Five Star, Italy threatened to
withdraw toll road concessions, sending Atlantia SpA’s shares plunging,
and quarreled over industrial projects from railroads to steel mills to
pipelines. The anti-business rhetoric added to investors’ concerns over the
country’s clash with the EU over its debt.

A string of
upcoming deals, including some expected initial public offerings, will be a key
test of investors’ appetite for Italian assets.

“Now there
is this opening by the market to the government, which cannot waste this
opportunity,” Fabrizio Pagani, head of economics and capital markets strategy
at Muzinich & Co., said in a Bloomberg TV interview with Francine
Lacqua.

A positive
mood toward Conte’s administration may give him more leverage with European
partners at a time the priorities for Europe are being rewritten. Italy may
even get away with some more leniency for its budget deficit, especially after
it appointed Roberto Gualtieri, a Brussels insider, as finance minister.

Still, it’s
too early to say if confidence boost will have a lasting impact on Italy’s
stagnating economy. While Italy climbed one position to number 16 in Aviva’s
ranking of countries’ business attractiveness, more work needs to be done to
reduce bureaucracy and raise investments in a sustainable way.

Conte’s
shaky coalition is unlikely to have the clout to tackle Italy’s long-running structural
problems. “Italy needs to do reforms, all Italians are aware of that, and as a
result I think this will facilitate growth,” said Davide Serra CEO of Algebris
Investments.

The post Italy once again eyed by investors as populist threat subsides appeared first on maltawinds.com.

Original article found on Malta Winds

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