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Silvio Berlusconi stands with Matteo Salvini during a rally in Bologna 2015
Image: Silvio Berlusconi stands with Matteo Salvini during a rally in Bologna 2015. REUTERS/Stefano Rellandini

Italian and German Elections Underscore Uncertain Trading Future

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Image: Silvio Berlusconi stands with Matteo Salvini during a rally in Bologna 2015. REUTERS/Stefano Rellandini

Italy’s election on March 4 are rapidly approaching and its results could have an effect on all of Europe.

While Silvio Berlusconi and his center-right bloc is expected to win, he will not likely gain a working majority.

Investors Are Watching

Italy’s election result uncertainty has investors watching very closely to the recently published poll results. Laws in the country prohibit publication of polls until the inside of 2 weeks from an election. Now, the results have shown that the election could take a rather unexpected turn. The economy in Italy is getting stronger and, as it does, the sentiment is leaning further away from the Euro.

Furthermore, the same day that Italians head to the polls, Germany will also be learning the results of a ballot among the members of their Social Democrat party. They are voting on a coalition deal with the conservatives under Chancellor Angela Merkel. The outcome of that particular vote will decide Merkel’s future in her current position, either ending it or ensuring it.

Just as the Italian results will be defining for many other European countries, so will the German outcomes. A new coalition in Germany is predicted to take a new pro-European stance. A more conciliatory approach is expected for fiscal policies within the bloc.

What Investors Want to Know About Italy

The outcomes of these votes will dictate a great deal regarding the direction investments will be taking in the near future and in coming months. The election in Italy could decide many things for investors. For instance, in Italy, it’s believed that a hung parliament is the most likely outcome.

This means either there will be no single party in the majority or a coalition will come together to form the majority government. Should President Sergio Mattarella call the parties to create a coalition among parties that were adversaries before the election, it may involve Silvio Berlusconi’s Forza Italia as well as the current ruling center-left Democratic Party.

To investors, this will represent political stability and European policy continuation, which will form a positive market outcome.

What Investors Want to Know About Germany

In Germany, the Social Democrat (SPD) ballot will finally bring to a close nearly half of a year of European uncertainty. Germany is the E.U.’s largest economy and the uncertainty there has been making trade decisions rather challenging.

Should the members of the SPD vote “yes” on whether the center-left party should be joining the conservatives under Merkel in government. That would build a new coalition and would make it possible for Merkel and the government to move forward in making needed reforms within the European Union.

On the other hand, if they should vote “no,” it would either lead to a majority government or it would launch an entirely new election. Either of those options would be required to develop ad hoc alliances in order to make it possible for legislation to pass. This would be harmful to both German political uncertainty and the business world.

What to Hope for

While most investors are hoping for stability, any negative surprises that result from Italy or Germany could cause considerable shake-up among investors. It would require entirely new strategies in terms of their choices and timing.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.