Ex-Bank of Italy Official: Italy’s ‘unnecessary’ political crisis could turn out to be a positive for Rome

In an interview with CNBC late-Wednesday, a former official at the Bank of Italy a senior fellow at the think tank Bruegel, Francesco Papadia, expressed an upbeat take on the ongoing Italian political upheaval.

Key Quotes:

There’s an upside to the ongoing political crisis in Italy: the upcoming government cannot be worse than the current M5S-Lega coalition.

That was the worst possible coalition for economic policy, both in terms of fiscal policy, both in terms of structural policies. So, anything that comes in place of that would be better.

Two possible outcomes to the Italian political crisis include: a coalition between M5S and Partido Democratico (PD), which criticizes both the trade unions and the banking industry; or a right-wing coalition led by Lega.

The possible scenarios are better than the Lega-M5S government, but “better, of course, does not mean good.”

The sentiment around the shared currency is likely to be driven by the Euro area Manufacturing PMI reports ahead of the Fed’s Jackson Hole Symposium.