Update (3:10 pm ET): As was widely expected, Italian Prime Minister Giuseppe Conte has resigned, according to Italian President Sergio Mattarella.

🇮🇹 Le Premier ministre italien, Giuseppe #Conte, annonce sa démission ⬇️ pic.twitter.com/D1eH11Fte4 — FRANCE 24 Français (@France24_fr) August 20, 2019

Giuseppe Conte: "After the end of the parliamentary debate I will go to the president of the Republic to officially inform him of the interruption of this government experience and to offer him my resignation as prime minister."https://t.co/T9EOZo0juU pic.twitter.com/A0CEtDHY5p — euronews (@euronews) August 20, 2019

The political turmoil in Italy may indeed have consequences for the country's economy.



The question is: how far reaching? https://t.co/JRpAboPUcy — euronews (@euronews) August 20, 2019

Up until now, Matteo Salvini has been Italy's ruler in all but title. Expect that to soon change.

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Until today, Italy has had 61 governments since World War II. We can now make that 62.

Moments ago, during a scathing speech that slammed his his deputy premier, Matteo Salvini of the League who is also Italy's most popular politicians and defacto leader, said Salvini’s decision to spark a political crisis was “irresponsible,” motivated by personal ambition, and will bring down the curtain on the coalition that led the country for just over a year.

In a much anticipated speech to the Senate in Rome, Conte lashed out at Salvini, saying it wasn't in Italy’s interests to hold elections every year, clearly unaware that that's pretty much what Italy has been doing for the past 6 decades. The premier also accused Salvini of not properly responding to allegations in the so-called Russiagate case and said he had overstepped his role as minister.

The government’s actions “terminate here,” Conte said, laying the blame for the collapse of the coalition squarely with Salvini and his personal agenda.

Moments later he said he would go to president Mattarella to resign.

The end of the government was largely expected after Salvini pulled his support from the governing alliance with the anti-establishment Five Star Movement earlier in August, saying the coalition no longer has a working majority and setting the stage for a government headed unilaterally by Salvini. The 46-year-old anti-immigration hardliner has been seeking to cash in on his soaring poll ratings and as Bloomberg notes, upended the political establishment with a mid-summer power grab while parliament was in recess.

What happens next will have major implications on Italy’s mountain of public debt which has become the weakest link for Europe's financial system. One year ago, the ECB effectively threatened to boycott Italian debt as part of its QE sending it plunging. Now that Salvini is set to be Italy's leader, and the ECB set to restart QE, the question whether Rome will be isolated will once again become front and center, especially with even more debt on tap: on Tuesday, Salvini promised Italians €50 billion of tax cuts and public spending if he can take control of the government.

Italy’s 10-year bond yields were sliding as Conte spoke, briefly rose on his resignation, then resumed sliding.

Source: Bloomberg

Rishi Mishra, an analyst at Futures First, says that bonds are rallying because the government's budget proposals are likely to be delayed.

"That, and the fact that unlike in May 2018, there is less fear of Italians moving towards an exit from EU," he says, referring to the formation of the last coalition.

Stocks moved in parallel.