Italian Politics Spark Uncertainty In The Eurozone

The euro was under pressure on Monday after volatile Italian politics flared up over the weekend. The common currency traded at $1.3482 at 6:55 GMT as gains against the dollar were limited by uncertainty about a US government shutdown. Italy's former Prime Minister Silvio Berlusconi has ordered five of his ministers to resign from the nation's already fragile coalition government. Berlusconi has been threatening to take down the government if he is forced to resign from the Senate because of his recent tax fraud conviction. Berlusconi and his People of Freedom party have claimed that a planned sales tax hike is the reason for the resignations. The party is opposed to the measure, part of a larger plan to reduce Italian debt. According the BBC, Prime Minister Enrico Letta responded by saying the sales tax is just an alibi for Berlusconi's personal problems. Moving forward, uncertainty over how the government will recover is likely to put pressure on the euro. The nation could hold new elections and choose an entirely new government, or attempt to piece together a new coalition with the remaining Senate members. The dollar has also fallen under pressure as investors wait for a decision from Washington about an emergency spending bill which will keep the government running past October 1st. As the midnight deadline draws nearer, the dollar has weakened on the possibility of a shutdown. Many believe that even if the government shuts down for a short period, the impact will be minimal. However, the infighting over the spending bill could foreshadow budget ceiling discussions later in the month.