Political risk within European markets ratcheted up this week, after Italian president Sergio Mattarella refused the anti-establishment Five Star Movement/League coalition’s choice of finance minister, Paolo Savona. The rise of the anti-establishment parties and nomination of eurosceptic Mr Savona – and the ensuing concerns around the security of Italy’s EU membership – sent the yield on Italian two-year government debt up to a near six-year high. Mr Mattarella has appointed former International Monetary Fund official Carlo Cottarelli as interim prime minister. If the populist parties cannot agree talks to form a new government, the electorate is expected to head back to the polls in the autumn.
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