Italian banking stocks have also been improving since the December 5 low after Prime Minister Matteo Renzi announced he would resign following the referendum defeat on December 4, which also fueled heavy short covering and further bolstered prices.

The Italian government has been under pressure to calm concerns over its ailing banking system, which underperformed in the European Central Bank’s 2014 financial stress test and is holding €360 billion, or $410.5 billion, in bad loans.

“In December 2016, the Italian government set up a Treasury-funded EUR20 billion (1.2% of GDP) fund earmarked for precautionary recapitalisation needs. Government-backed recapitalisations through the fund are conditional on the banks presenting restructuring plans. MPS was the first bank to request that the fund intervene via precautionary recapitalisation. The European Commission is still examining its request and there is not yet clarity on the exact burden for creditors or the amount of capital to come from the state,” said Fitch.

Alternatives to EWI include the the iShares Currency Hedged MSCI Italy ETF (NYSEArca: HEWI) and Deutsche X-trackers MSCI Italy Hedged Equity ETF (NYSEArca: DBIT), both of which are currency hedged ETFs.

For more information on Italy, visit our Italy category.