Worst Case Scenario Is Here: Berlusconi Says Only Option Is Early Elections

Tyler Durden's picture

Well that rumor lastest all of 30 minutes:

  • BERLUSCONI: `ONLY POSSIBILITY' IS EARLY ELECTIONS -Bloomberg
  • BERLUSCONI: PRESIDENT WILL DECIDE HOW TO RESOLVE CRISIS -Bloomberg
  • ITALY'S BERLUSCONI SAYS IMPORTANT TO ACT IN COUNTRY'S INTEREST -Bloomberg

In other news, G-Pap is still Greek PM. But any minute now. Aaaaaaany minute... And as a reminder, the worst case scenario was earlier determined by Credit Suisse to be the worst possible outcome of the Italian chaos.

Early elections. The most market negative option in the short-term, in our view, and a sign of incapacity to reach an agreement at the political level. Uncertainty on the outcome of the elections could last for several months, as elections would be called at the earliest in January but possibly as late as March or April. As the chart below shows, it is unclear if the current opposition will win a clear mandate. The President of the Republic will likely try to avoid an early election in all possible ways, in our view. We attach a 30% probability to this scenario.