Italy: Prodi's Weakness Roils The Markets

Prime Minister Romano Prodi's honeymoon with the financial markets is over. The markets had high hopes that Prodi's center-left coalition could deliver a tough fiscal program aimed at European Monetary Union that would give the Bank of Italy added leeway to cut interest rates. Now, Prodi's fiscal agenda is uncertain amid concerns that his Olive Tree coalition is weak. The BOI seems in no hurry to cut rates, even as the economy weakens. And both the stock and bond markets are showing their disappointment.

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