As the last week of campaigning moves into gear, investors are keeping an eye on Italy's elections, which take place on February 24th and 25th. Markets are complacent as recent polls have shown a relatively assuring central scenario with a victory expected for the pro-European centre-left that would most likely form a government with the current Prime Minister Mario Monti's group.

Still, Credit Suisse points out that there are "several alternative and sub-scenarios that cannot be dismissed" which leads the broker to the conclusion that the "Italian elections remain a significant risk event".

The last polls undertaken before the survey blackout period began on February 9th gave center-left leader Pier Luigi Bersani a 5.7% lead over Silvio Berlusconi's centre-right coalition. The Italian comedian Beppe Grillo held third place with Monti's group running fourth.

In its research report Credit Suisse highlights the uncertainties related to at least three issues: "First, to the progress of Silvio Berlusconi's centre-right group in the polls in recent weeks.

Second, to the trend in the protest vote, which has been rising again in the last couple of weeks according to the polls.

Third, even if the centre-left does manage to reach an agreement with the centrists, it is still unclear if the government would have sufficient seats to form a solid majority, and if the coalition would be sufficiently stable."

JM

Related share prices