It looks like the days of the 2012 debt crisis will swell again for investors as Italian, Portuguese and Greek bond yields rise and billionaire George Soros warned of a " existential threat" to the European Union  The trigger was the prospect of anti-European, nationalist parties in Italy, who made a new election for a de facto referendum on the Italian euro membership. Italian assets fell on Tuesday, with the 10-year bond risk premium higher against German benchmarks, the highest in nearly five years.
"Italy is now facing elections in the midst of political chaos," Soros said in a speech in Paris, warning that a failed economic and immigration policy would lead to "no talk more is to say that Europe is in existential danger, it is the harsh reality. "
Despite all the talk of economic recovery and a return to stability, the last few days have shown how quickly sentiment is felt on a continent where Disillusionment and division are still prevalent, the south may be faltering. It may not be as bad as it was a few years ago, but in the coming weeks and months, there is little chance of a decline in political risk.
The euro slid against the dollar to a ten-month low of $ 1,151 as of Tuesday, and the Japanese yen led gains in the group of ten currencies on port demand. Asian stocks fell early on Wednesday while US Treasury gold risk averages stabilized.
The uncertainty about Italy and the political turmoil in Spain, with the Prime Minister facing a vote of no confidence, contaminated European peripheral markets such as Portugal and Greece. 10-year Greek government bond yields rose nearly 5 percent, complicating the country's plans for a clean exit from its rescue program in August.
In 2012, the eurozone was occupied by elections in Greece before the European Central Bank declared that it would do anything to support monetary union.
In Italy, it is a confrontation between the establishment and two parties that appeared on anti-EU platforms with deficit spending and reduced immigration. Now investors have recalculated the risks of the eurozone's third largest economy from the currency block.
Italy's Democratic Party has tasked its rivals, the League and the Five-Star Movement, with a plan to pull the country out of Monetary Union. This has brought back memories of 2015 when the Greek opposition accused the government of Alexis Tsipras of protesting with creditors against austerity policies in order to leave the currency block.
Italy is only a few steps away from the "very serious risk of losing the irreparable leap of faith," said the Governor of the Bank of Italy, Ignazio Visco.
Fear, not Reality
The panic spread to the stock markets, with banks being hit the hardest by fears over their exposure to Italy. A capitalization-weighted index of banks in the eurozone fell even by 5.2 percent, while Deutsche Bank AG fell by 4.6 percent to its lowest level since September 2016.
Jean-Pierre Mustier, chief executive officer of UniCredit SpA said the decline in Italian bank stocks were driven more by fears than by reality, based on the performance of the Italian economy or the lenders themselves.
Indeed, that grew Eurozone economy fastest in the past year and unemployment has fallen to its lowest level since financial crisis
"This contagion is the result of fears of a possible Eurozone explosion," said Diogo Teixeira, CEO of Optimize Investment Partners, a company based in Lisbon, which manages 150 million euros. in assets. He said, however, that "the likelihood of this is still weak"
– With support from Joao Lima
( Updates with Asian Trade in the fifth paragraph. )