Source: Bloomberg

Italy is the source of systemic risk to watch. Government debt/GDP is above 130%, the economy continues to drag along well below pre-crisis output levels, and the populist parties have a combined prospective vote large enough to create a governing coalition. Italy has plenty of wealth (more per capita than Germany), and there are plenty of solutions that work on paper, none that work in politics. The spread between Bunds and Italian 10-year debt widened today to 1.92%. France widened also after National Front candidate Marine le Pen proposed a new national currency to replace the Euro.

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