Investors Concerned Over Especially Polarizing Political Crisis In Italy
AUDIE CORNISH, HOST:
Stock prices all over the world took a nosedive today. Here in the U.S., The Dow Jones Industrial Average lost 391 points or nearly 1.6 percent of its value. Investors seem to be scared by a political crisis in Italy. We're joined by NPR's Jim Zarroli. He's in New York, and he's been watching the markets all day. And, Jim, take us through what happened.
JIM ZARROLI, BYLINE: It was a really volatile day, lots of turmoil. A lot of stocks lost ground, especially the big global bank stocks - French banks, German banks but also some American banks - JPMorgan Chase, Bank of America, Citigroup all down. It's really a good illustration of how interconnected the global economy is. This all seemed to be tied to what's happening in one country, Italy, and the struggle to form a government there.
CORNISH: But this is not the first time Italy has been through a political crisis, so what's different this time around?
ZARROLI: The potential ramifications are different, I think. This time, you essentially have two populist parties trying to form a government together. One is, you know, more left-wing. One is more right-wing. They recently drew up a list of potential cabinet members. And over the weekend, the Italian president rejected it. He objected to the man they had proposed as economy minister. He's 81-year-old economist Paolo Savona. And the reason the president didn't like him is because Savona has been very critical of Italy's membership in the eurozone. He wrote a book recently in which he called it a German cage. He said Italy needs to draw up a contingency plan to possibly leave the euro if necessary. And it's really that prospect of Italy leaving the euro that's causing all this turmoil.
CORNISH: But why would just the suggestion that Italy might walk away from the euro scare so many people - right? - move markets?
ZARROLI: Well, remember; Italy's a big country. It's the third-biggest economy in the eurozone. And if it left, it would really raise existential questions about the future of the eurozone and really about globalism in general. This has to be looked at in the context of the broader anti-globalist sentiment that's been seen in a lot of places. It's, you know, the same sentiment that brought us Britain's decision to leave the European Union and also the election of Donald Trump.
And then on a more practical level, you have to consider that Italy has a lot of debt. And some of it is held by foreign banks, so if Italy left the eurozone, all that debt would suddenly be worth a lot less. And in a global, interconnected economy, that would be felt throughout the system.
CORNISH: Is there a chance, though, that Italy would contemplate leaving the eurozone altogether?
ZARROLI: It doesn't seem like it. I mean, the two parties that are now trying to form a government say it is isn't something they're seriously considering. But, you know, there is a fair amount of scepticism about the euro in Italy. A lot of people feel like the government has just handed over too much control to Europe. And so we're waiting to see how that's going to play out politically.
CORNISH: That's NPR's Jim Zarroli. Jim, thank you.
ZARROLI: You're welcome. Transcript provided by NPR, Copyright NPR.