JPMorgan Chase & Co. (NYSE:JPM) and Goldman Sachs Group Inc. (NYSE:GS) were down over 4% and 3%, respectively, amidst renewed turmoil on the European continent. The top three U.S. indexes were all down in early afternoon trading.
In the aftermath of a landmark election, attempts to form a government in Italy by the Five Star (M5S) protest movement and the far-right Lega Nord party have failed. Giuseppe Conte withdrew after President Sergio Mattarella refused to appoint euro skeptic Paolo Savona as minister of finance and economic affairs. Savona has made it public that he seeks a planned exit from the euro currency.
Savona considers the Italian accession to the European Union (EU) a mistake and has labelled the euro currency a “German cage”. On Monday Matarella instead appointed Carlo Cottarelli, an establishment figure and a supporter of the euro. Five Star and Lega have refused to provide an alternative to the Savona appointment, and have instead threatened Matarella with impeachment.
Matteo Salvini, leader of the far-right Lega, has called Cottarelli a pawn of powers that seek to dictate policy to Italy – namely Germany and France. Lega may see an opportunity to seize further powers with a new election. In the previous contest it reached 17%, but is currently polling at 24% ahead of the social democratic PD. There is little doubt that yet another election will give the populist parties of Lega and Five Star the opportunity to campaign against an establishment that they will claim prevented them from governing.
The political conflict in Italy could potentially plunge Europe into one of the most dramatic crises since Brexit.
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