Italy's 5-Star Movement renews efforts to form gov't

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Europe

Italy's anti-establishment 5-Star Movement has renewed efforts to form a coalition government with the far-right League after the president rejected their Euroskeptic economy minister pick at the weekend, a 5-Star source said on Wednesday.

The parties are trying to find "a point of compromise on another name" for the economy ministry, the source said.

The coalition may also be widened to include another right-wing party, the Brothers of Italy, the source added.

League party leader Matteo Salvini speaks to the media after a round of consultations with the then prime minister Giuseppe Conte (not pictured) at the Lower House in Rome, May 24, 2018. /VCG Photo

However, League leader Matteo Salvini, whose party is surging in opinion polls, appeared to throw cold water on that idea, saying Italy should return to an election as soon as possible.

"The earlier we vote the better because it's the best way to get out of this quagmire and confusion," Salvini told reporters.

Political turmoil

Italy's political uncertainty is continuing as the caretaker prime minister Carlo Cottarelli on Tuesday ended talks on forming a government without unveiling his cabinet line-up.

This followed the populist coalition's failed attempt to govern.

On Sunday, Italian President Sergio Mattarella vetoed a cabinet proposed by the anti-immigrant League and their allies in the 5-Star Movement (M5S).

The sticking point appears to be the League/5-star coalition's pick of the Eurosceptic Paolo Savona as the economy minister, which was blocked by the president.

The populists cried foul and abandoned their joint bid for power.

The newly appointed Prime Minister Carlo Cottareli arrives for a meeting with Italian President Sergio Mattarella at the Quirinale palace in Rome, May 28, 2018. /VCG Photo

President Mattarella then appointed the former IMF official, pro-austerity Carlo Cottarelli as the interim Prime Minister, tasking him with the formation of a technocrat government.

Cottarelli had promised to deliver the list "as soon as possible," but he left the presidential palace on Tuesday afternoon after a brief meeting with President Mattarella, without making any statement.

In the meantime, the populist coalition has vowed to boycott a government formed by Cottarelli, further destabilizing Italy's political prospect.

Influence on the financial markets

Earlier, fears that fresh elections might be the most likely outcome of the political upheaval in Italy sent shockwaves through both the European and the US markets.

The BBC revealed on Tuesday that the Dow Jones index shed 1.6 percent and the S&P 500 lost 1.2 percent, coming after Italy's FTSE MIB closed down 2.7 percent and Europe's other main markets shed well over one percent.

The fate of the European Union has been cast into doubt again due to the political crisis in Italy. /China Daily Photo

A sell-off in Italian bonds saw the yield on two-year debt breach two percent.

According to the BBC report, it meant that short-term Italian bonds suffered their biggest one-day jump in 26 years.

Hand in hand with the market turbulence was the shake of the confidence in the stability of the euro and the European Union.

France 24 quoted Greg McKenna, chief market strategist at AxiTrader, as saying: "As the third biggest economy in the EU, as a heavily indebted one, and with Eurosceptics seemingly in the ascendancy, markets have worried that the EU again faces an existential crisis."

(With inputs from Reuters)