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Mr Rosenberg, chief fixed-income strategist at BlackRock, said a so-called “Italexit” could be on the cards after a potential coalition between the Five Star Movement (M5S) and Lega collapsed when Italy’s president Sergio Mattarella vetoed the appointment of a eurosceptic as finance minister. Speaking on Bloomberg News, Mr Rosenberg said: “I think it’s the realisation to the new change in the facts of you now have, potentially here, a referendum. “You’re setting up this election as a referendum that raises the stakes on the potential downside scenarios. “So, the market is pricing a set of distributions, a distribution of a set of outcomes. One of those outcomes had been very very small, the outcome of a renegotiation.

Italy news: Jeff Rosenberg said there is a realisation that Italy could have an "Italexit" vote

It’s the realisation to the new change in the facts of you now have, potentially here, a referendum Jeff Rosenberg

“Let’s not say the exit because there’s a lot of interim steps that one could take that fall short of a full on exit.” Mr Rosenberg said the likelihood of an “Italexit” is “very small” but insisted it cannot be viewed as an unlikely outcome. He added: “So you start pricing in those probabilities. So that’s not something that is going to go away because the uncertainty of the elections is not going away any time soon. “None of this has a quick ‘oh, let’s just unscramble the egg and go back to where we were two or three months ago’. We have to move forward and as we move forward we are going to move forward through a couple of different scenarios.”

EU Budget Commissioner Gunther Oettinger said on Tuesday that he is hopeful that a "drastic economic impact" on Italy caused by the ongoing political upheaval will be a lesson to voters not to “hand power” to populist parties. The EU finance boss claimed the collapse of Italy’s would-be government could “drastically” impact the Italian economy and teach voters not to support populists. Italy's FTSE MIB benchmark index fell 2.1 percent to its lowest since early March and Europe's STOXX 600 slid 0.3 percent on Monday. The euro today slumped to $1.1617 from Monday's $1.1608, its lowest since early November.

Italian election pictures: Who won the Italy Election 2018? Mon, March 5, 2018 Italian election pictures: Who won the Italy Election 2018? Play slideshow Getty Images 1 of 21 Candidate of Five Stars Movement Alfonso Bonafede