Spain can cope without Rajoy but Italian politics still a worry

In any other week, the imposition of tariffs on the EU by the US would have taken centre stage. But amid the political and market turmoil in Italy and the downfall of Spain’s government, this was no normal week even for the euro-zone. The risks of a renewed surge in Italian bond yields have diminished following the formation of a government there. But the new administration is on a collision course with the EU and tensions may flare up again before long. Elsewhere, we doubt that political uncertainty in Spain will have much of an effect on its economy. But while the steel and aluminium tariffs will have little effect on euro-zone growth, the prospect of US tariffs on car imports poses a key risk to the economies of Spain and Germany in particular.