The divide between the 'givers' and the 'takers' is well known across the broad European Union, but it is just as prevalent in the next risk-flaring centre - Italy - and this chasm between the two sides of fiscal profligacy will mark a critical separation in the pending elections. As the chart below shows, the North of the country tends to be the net tax contributor and the South the net receiver of fiscal benefits. At the very top is Lombardia (the richest state), a northern region that sends a net EUR44bn to the rest of the nation - and unsurprisingly perhaps is very pro-Berlusconi (in the polls) and has the most seats allocated (at 49 of 315). Interestingly, the region at the other end of the scale (the most broke state) - Sicilia - which receives net EUR 12.8 from the rest of the nation is also pro-Berlusconi's centre-right party. So it seems the rich and the mafia want Silvio though current opinion polls suggest Sicily is too close to call. The Italian election, for now ignored by all but the Italian sovereign bond market, remains a key risk event for confidence that Draghi's OMT promise can really hold things together - no matter how profligate a nation becomes.
Italy’s ability to pursue structural reforms is part of the conditionality in the event that it calls on the OMT. In other words, if in the worst case scenario reforms were suspended, there would be no access to the OMT.
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State of the most recent polls - as we posted recently [7]:
Based on opinion polls, PD-SEL-Monti securing a majority in the Senate: with 2 seats to spare if PD loses the three key regions and with 14 if they win Lombardy. The table below shows seats distribution based on current opinion polls, assuming PD-SEL lose Sicily, Veneto and Lombardy, and that the election result is broadly in line with the latest detailed survey available from Tecne’ conducted on the 31st of January showing 34% for the centre-left coalition, 28.6% for Berlusconi, 13.3% for Monti and 16% for Five-Stars. We highlight that the opinion polls show Sicily and Lombardy is still too close to call, in the event that PD manages to secure Lombardy, the majority in the Senate together with Monti would be 14 seats.
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and from Bloomberg:
The key battlegrounds in the Senate race will be the swing regions of Lombardy, Sicily and Veneto, traditionally centerright strongholds in past elections, and Campania. In Lombardy, which also holds a local vote for governor, Berlusconi’s bloc led Bersani’s and his allies 34.7 percent to 34.3 percent, according to the average of nine polls last month. In Sicily, Berlusconi led 30.4 percent to 28.5 percent, according to the average of six polls. In Campania, Bersani led 33.1 percent to 30.1 percent, polls show. These regions are considered too close to call as the gap between the coalitions is within the average margins of error. In Veneto, Berlusconi led 38.7 percent to 31.6 percent, according to the average of six polls.
Should Bersani lose Lombardy, he would need to win the other three swing regions, Sicily, Campania and Veneto, and could only afford to lose one or two smaller regions to get an outright majority of seats in the upper house, based on polls. Even if Bersani wins Lombardy, he will probably need to grab at least Campania or Sicily or Veneto for a 158-seat majority, based on polls