It seems like ages ago that the Italian election result caused markets to spasm and volatility to surge.
In fact, it was just on Monday, and by the end of the week, the event had largely been forgotten by the global markets (although Italian markets continue to underperform, as headlines reveal the difficulty the parties will have going forward in their attempt to form a government).
But it would be a mistake to think the significance of the elections is just old news.
To recap what happened: The big “winner” of the election was Beppe Grillo, the populist, anti-bank comedian, who took nearly 25% of the vote. Between him and Berlusconi, anti-austerity forces took over 50% (!) of the vote. Since the current stability in Europe is premised on a bargain whereby the ECB promises to backstop government bond markets in exchange for austerity, this massive rejection of austerity is a shot straight to the heart of how Europe has managed to calm its crisis.