background image

Chart of the Week : Sentix Break-Up Probability for Italy

Macro

Christopher Dembik

Head of Macro Analysis

Summary:  Our 'Macro Chartmania' series collects Macrobond data and focuses on a single chart chosen for its relevance.


Click here to download this week's full edition of Macro Chartmania.

At the start of the crisis, some analysts pointed out once again the risk that Italy, hit hard by the health crisis and the recession that immediately followed, might face the risk of existing the euro area. A few months later, this risk has never seemed more unlikely. According to the latest Sentix survey of 1000 investors released last month, the probability that Italy leaves the Eurozone within one year is basically close to zero. Only 1.7% of institutional investors expect this doomsday scenario to happen – the lowest level since March 2018. Historically, institutional investors have always been more optimistic about Italy’s future within the Eurozone than private investors. It has proved right once again since 5.8% of private investors believe Italexit is a credible scenario. It reached an annual peak at 15.4% in the midst of the crisis and since then it has considerably receded to get almost back to pre-covid level. The massive and fast ECB measures coupled with the coordinated EU response via the Next Generation deal have shifted perception in the space of a few months regarding the risk of EU dismantlement. Not only does Europe appear to be in good position for a major economic rebound next year, but above all the EU seems to be finally built on a solid foundation of political will. Doomsday preppers that repeat the old mantra that Italy will exit the euro area at each crisis forget that Italexit is all about cost-benefit trade-off. There are evidences that the introduction of the euro generated negative spillovers in the Italian industrial sector but, at the same time, the monetary union strengthened the country’s financial resilience in a world of uncertainty and more frequent crisis. Not to forget the cost of belonging to the Eurozone is undeniably lower than the cost of exit. Said differently, private investors should not pay so much attention to doomsday preppers regarding the future of Italy. All indicate that the country will remain a key member of the monetary union in the coming years.

10_CDK_1

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.