Italy’s Populist Surge May Delay End to Eurozone Stimulus<br />Only a week ago, many analysts were predicting that the council, which was to meet on Thursday to set monetary policy for the 19-nation eurozone, would<br />drop language from its communiqué in which it promised to ramp up its economic stimulus program again “if the outlook becomes less favorable.”<br />That would have been a subtle but important change.<br />But Italy also has the eurozone’s third-largest economy, with output 10 times<br />that of Greece, making it a far bigger danger to the region’s financial stability if investors begin to doubt the government’s solvency.<br />By omitting the phrase, which it has repeated since December 2016, the central bank would in effect be saying<br />that the eurozone was no longer in imminent danger of going up in flames, and that it was time to begin stowing the fire hoses.<br />“We have to bury the hope that Italy will catch up with Germany<br />and France with reforms,” Holger Schmieding, chief economist at Berenberg, a German bank, said over lunch with reporters in Frankfurt on Tuesday.<br />A confused election result in one of the eurozone’s biggest<br />and most troubled countries may well prompt the central bank’s policymakers to slow down its exit from crisis mode.<br />The specter of a trade war with the United States could also give members of the bank’s Governing Council reason to pause.
