With crucial elections on the way and the lack of a stable government in Italy, Europe is swamped by political risk, but peripheral markets have not yet fully priced such risk, a chief investment officer told CNBC on Friday.
"I don't believe political risk has really been fully priced into peripheral markets," Scott Thiel, deputy chief investment officer of fixed income at Blackrock, told CNBC.
"Clearly the benefit of ECB's purchase program is going to help the higher yielding asset, so Portugal, Italy etc. But when you look at all yields on offer against the backdrop of political risk, I do think it's time for an active management process in Europe," he said.
Political parties in Italy are currently holding meetings to try to overcome the instability in the fallout of the prime minister's resignation. France, Germany and the Netherlands are getting ready for key elections next year amid rising support for populist parties.
"I think holding Italian 10-year bonds at 2 percent for a long period of time through the political risk that we're going to see both in Italy and France and later in Germany is a daunting prospect," Thiel added.
From all the elections expected in 2017, Thiel said that special attention should be given to France. It is a core European country and when compared to Germany the risk of populism is higher. The leader of France's extreme right party, Marine Le Pen, is set to win the first round of the presidential election.
"In my mind the French elections are obviously the most important," Thiel said.
Developments in France will be "an important driver for the direction and thoughts around the euro zone," he added.