Italy Stocks Slide As Government Crisis Deepens

The last time Italy was close to a full out collapse was in November 2011 when ECB's then-recently appointed new head Mario Draghi forced Berlusconi out following an (ECB uncontrolled) plunge in Italy bonds. It is only fitting that following Bunga Bunga's latest tax fraud conviction, and the resulting power circus, it is Sylvio who threatens Italy's government, and stability, once again.

Italian stocks down most in 2 months on this news...

As Ansa reports, premier Enrico Letta called a snap meeting Monday with core members of his fragile coalition government amid concerns of a government collapse surrounding ex-premier Silvio Berlusconi's possible ouster from the Senate. Joining Letta were Deputy Premier Angelino Alfano, the No.2 in Berlusconi's center-right People of Freedom party, as well as Economy Minister Fabrizio Saccomanni and Regional Affairs Minister Graziano Delrio.

Government sources said the meeting is centered around the controversial IMU property tax, which the cabinet is scheduled to rule on once and for all on Wednesday. The PdL upped threats Monday to topple the government if it does not roll back the tax on primary residences, a major campaign promise of Berlusconi during February elections.

The threat has added to concerns of a government meltdown surrounding a vote in the Senate next month to strip Berlusconi of his seat in the Upper House following his first-ever binding conviction on August 1 for tax fraud. The PdL says it will pull out of the government and force new elections if members of the center-left Democratic Party (PD) vote to ratify the office ban.

And while we understand that nothing in Europe is allowed to trade down ahead of the German elections, not even Greece which over the weekend formally announced its initial third bailout starting bid at €10 billion, today's the FTSE MIB appears to not have gotten the memo, and at last check the Italian stock market was down 2.5% as the severity of the most recent Italian government crisis starts being appreciated.