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Euro breakup fears

November 29, 2016

A poll by an investment consultancy has shown that more investors than ever consider a breakup of the eurozone likely in the next 12 months. Italy's woes are in focus, but it's not the only potential trouble spot.


Presenting its latest monthly eurozone barometer, consultancy Sentix said Tuesday investors were more and more worried about Italy, fearing that a "no" vote in a constitutional referendum on Sunday could trigger a political and economic crisis with far-reaching consequences for the future of the euro area.

The Sentix barometer for this month showed that nearly one in five institutional investors (19.3 percent) thought Italy's exit from the euro was likely, marking the highest probability level since the inception of the index in June 2012.

"Euro breakup fears are coming back with a vengeance," Sentix Managing Director Manfred Hübner said in a statement, pointing to investors' worries about ailing Italian banks.

Growing concerns

Mote dei Paschi di Siena (MPS), Italy's most troubled bank, saw its stock value tumble by another 15 percent at the beginning of the week, while share prices for UniCredit, the nation's largest lender by assets, were down 4 percent.

The "Financial Times" reported said recapitalization plans for a total of eight Italian banks were likely to fail with a "no" referendum vote, because an ensuing crisis would sap investors' confidence in the Italian economy.

"Typically, only a single country occupies investors' attention [in the Sentix poll]," the consultancy said. "This time it's different; we measure a significant increase in perceived eurozone exit probabilities across many member countries, particularly in France and the Netherlands."

The index' overall eurozone breakup probability reading rose to 24.1 percent this moth, "reinforcing the notion that a surprisingly strong anti-euro sentiment has evolved during 2016."

hg/sgb (dpa, Reuters)


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