Italian Bonds Tumble As Renzi Quits Democrats, Sparking New Political Instability

Everybody who bet against Iranian debt on the belief that the only-days-old coalition between the Five Star Movement and Italy’s Democratic Party would swiftly fall apart might have been on to something.

Italian bonds tumbled Tuesday morning after former Prime Minister Matteo Renzi officially quit the Democratic Party to start his own political group. Though Renzi has said he will back PM Giuseppe Conte, investors are clearly worried about the prospects for more political instability.

“I have decided to leave the PD and to build together with others a new house to do politics differently,” Renzi wrote on Facebook.

Renzi, who was seen as a centrist reformer when he was elected in 2014, left office in 2016 amid a wave of dysfunction. But since his time in office, the party has shifted further to the left, with many left-recruits loyal to current party leader, Nicolas Zingaretti. Some have long suspected that Renzi might leave the Democrats to start his own more-centrist party.

And it appears that’s what he’s doing.

“The victory we got in parliament against populism and Salvini was important to save Italy, but it’s not enough,” Renzi wrote.

According to Italian media reports, about 30 lawmakers might declare their loyalty to Renzi, but he has promised to continue to support the Conte government…for now at least.