Today there was some ease in the Italian bond market as the country successfully auctioned off intermediate term debt without any issues. This was good to see a drop in yields for the country but also a rise in the Euro, which has been highly correlated to the conditions coming out of Italy. This is welcome news as the perception of immediate danger to Italy (and the Eurozone as a whole) are put into perspective. Longer term there are still dangers that exist and need to be addressed for a true reversal to take place.
The issues with Italy have just started to spread to the global markets and this relief of pending doom was much needed. In order for it to last the Italian government will need to change their tone on the need to stay within the Euro and build a strong coalition that believes in carrying out existing contracts with Europe. This prospect might be too much to ask without another round of elections to (hopefully) show the people's discontent with the League and Five Star's abilities to manage a coalition. This is not something that will happen overnight, but steps in the right direction as the coalition scales back their rhetoric in order to form a government will go a long way.
Another important factor that needs to take place is to have the rest of the Eurozone acknowledge this issue and start to be more vocal about further integrating the currency bloc. By showing a willingness of other major countries to go in the right direction, and build a more stable monetary union, markets will keep the contagion of the Italian election to Italy. Positive news of better monetary integration would help to defang the message that the far right used to get elected, forcing them to change tact.