Italy is likely to go back to the polls in September

Significance

Coalition negotiations have been transformed from a policy battle between parties into a constitutional clash between the parties and the president.

Impacts

• Markets will suffer further volatility if Mattarella cannot convince voters he has acted even-handedly.
• Differences between the League and Forza Italia could lead to a breakdown in the traditional centre-right electoral alliance.
• If the populists win again in September, they will be tempted to nominate Paolo Savona again as economy and finance minister.