June 14, 2018 / 1:52 PM / in 10 months

Italy's political ructions 'a pretty local episode', says Draghi

RIGA, June 14 (Reuters) - The European Central Bank saw no cause for wider concern from recent political upheavals in Italy, though new governments in the euro zone should be careful not to undermine its institutions, bank President Mario Draghi said on Thursday.

The euro and Italian government bonds have been on a roller-coaster ride in recent weeks as Italy went from a political vacuum to a government of anti-establishment parties that some investors feared could push the country out of the single currency.

While bond yields remained at fairly elevated levels, “it was a pretty local episode,” Draghi told a post-policy meeting news conference.

“We haven’t seen really any redenomination risk. Contagion was not significant if (there was) any at all.”

Senior members of Italy’s cabinet have sought to reassure markets in recent days by reaffirming their commitment to the single currency and playing down pledges to spend more and cut taxes.

According to reports in the Italian media Draghi, an Italian, personally pleaded with a senior lawmaker from the right-wing League — now in coalition with the 5-Star Movement — for the creation of a government.

This ended a four-month domestic political impasse and averted early elections that could have turned into a referendum on Italy’s euro membership, although the new government has already become embroiled in a diplomatic row over its tough stance on migration with France.

Draghi said the emergence of new governments with different views should not be dramatised. “We have 19 countries. We are bound to have 19 elections every now and then.”

But differences should be discussed “within the existing treaties.”

“It’s important that these discussions do not destroy the progress that’s been achieved after a lot of sacrifice... with a language that does not destroy (that) progress.” (Reporting by Francesco Canepa and John Stonestreet; Editing by Catherine Evans and Hugh Lawson)

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