THEY don’t like it up ‘em,” as Lance Corporal Jones used to cry on Dad’s Army. They in this case being EU bureaucrats and the European markets, both feeling bruised in all the wrong places following the remarkable Italian election results. The emergence of Beppe Grillo’s maverick Five Star movement as a serious political force, together with an impressive showing for the resurgent Silvio Berlusconi, is a decisive rejection of both the technocratic dictatorship of Mario Monti and Pier Bersani’s centre-left platitudes, and in favour of anti-EU political gridlock.
The Vix fear index, which measures market volatility, fell almost 10 per cent yesterday but remained up by more than a quarter from its opening value for the week. That followed a record volume of trade on Monday for the index, with 302,278 contracts at the CBOE Futures Exchange in one day, smashing the old record of 221,323.
Italy’s main index the FTSE Mib yesterday closed down about five per cent from the day before, reflecting wider losses. The FTSE 100 and the Eurostoxx 50 were both down, although America’s S&P 500 changed the mood a little by posting a slight rise.
Such stark moves in the European markets reflect the unnerving nature of democratic elections: the results can be hard to predict and price in, and once a new political settlement has been put in place, it cannot be printed or inflated away.
Lance Corporal Jones was also known for requesting “permission to speak, sir” but Europe’s elites should no longer rely on such deference. Parties of the people, for the people, if not terribly well-thought-through by the people are an inevitable reaction to the anti-democratic ethos festering at the heart of Europe’s integration project. That means more such shocks. The resulting uncertainty brings high short-term costs, but it also arguably lays the foundations for greater future stability. Don’t panic, don’t panic.