Series
What is this indicator?
As most of naive country-to-country indicators, it does not compare one economy to another. This is more about structural differences in the economies and market regimes.
Italy's index is effectively a leveraged bet on the solvency of the Eurozone. With massive weight in Banks (UniCredit, Intesa) and Utilities (Enel), it has almost no "Growth" component. It acts like a high-yield bond.
The related indicator is BTP-Bund Spread. This measures the difference in yield between Italian bonds and German bonds.
Spread Widens (Fear): EWI collapses faster than SPY.
Spread Narrows (Calm/Yield Hunting): Investors chase the high dividend yield of Italian banks, and EWI rockets up relative to SPY.
It closely related to European Central Bank (ECB) policy. If the ECB signals "we will support the bond market," hedge funds become more interested in buying the EWI.