France issues EU warning to Italy ahead of PM reveal

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France's finance minister has issued a warning to Italy's nascent government, saying the stability of the eurozone will be at risk if the Five Star-League coalition does not stick to existing financial commitments.

The Five Star Movement and League called for deep changes in Italy's relationship with the EU in a policy program published on Friday, and look to be on a collision course with Brussels over the proposals.

The leaders of the anti-establishment parties are due to reveal their nomination for a new prime minister on Monday, meanwhile, as the European country edges closer to a new government after 11 weeks of political deadlock.

PM nominee to be revealed

Matteo Salvini, leader of the far-right League, announced on Sunday that an agreement had been reached with Five Star over a nominee to be prime minister and cabinet members.

Neither Salvini nor Luigi Di Maio, the leader of the Five Star Movement, will take on the premiership. Local media reports suggested Salvini would lead the interior ministry and Di Maio would become either labor or economic development minister.

Supporters of anti-establishment Five Star Movement promote a program for government with the far-right League, in Milan, May 20, 2018. /VCG Photo

Florence University law professor Giuseppe Conte and Andrea Roventini, a professor of economics at Sant’Anna University in Pisa, are in the frame to take on the top job according to Huffington Post Italy.

The two parties must announce their pick for prime minister in time for a meeting on Monday with President Sergio Mattarella. Mattarella must agree to the parties' nominee before they can seek parliament's approval for the proposed new government.

French eurozone warning

French Finance Minister Bruno Le Maire, speaking to CNEWS on Sunday, said Italy's commitments to the eurozone must remain "whichever government" was in place as EU concerns over the proposed coalition policy program grew.

"If the new government takes the risk of not respecting its commitments on debt and the deficit, but also the clean-up of the banks, the financial stability of the eurozone will be threatened," the finance minister said.

French Finance Minister Bruno Le Maire speaks at an informal meeting of economic and financial affairs ministers (ECOFIN) at the National Palace of Culture in Sofia, April 28, 2018.

Salvini responded by accusing Le Maire of "an unacceptable pitch invasion," the Financial Times reported, and adding: “I didn’t ask for votes… to continue on a path of poverty, precariousness and immigration: Italians first!”

The 58-page "Contract for the Government of Change" – approved by 94 percent of Five Star members in an online vote – announced the parties' intention to review "with European partners the economic governance framework" of the EU, including the euro.

Brussels is anxious that Italy continues with efforts to bring down its debts in line with EU rules, wary that a new government in Rome will seek to increase public spending. The EU forecasts that Italian public debt will remain 130 percent above its GDP this year – more than double the bloc's 60-percent ceiling.

Supporters of the far-right League promote a program for government with the anti-establishment Five Star Movement, in Milan, May 20, 2018. /VCG Photo

"I respect the sovereign decision of the Italian people, but there are commitments which go beyond all of us," Le Maire added. "I cannot stress enough how important it is to keep these commitments in the long-term to guarantee our common stability."

A senior official from the sister party of German Chancellor Angela Merkel's CDU also issued a warning at the weekend. "The new debt coalition in Italy is a warning shot for Europe. The EU's principle of stability is non-negotiable for us," Alexander Dobrindt said in a statement. "Germany cannot foot the bill for Italy's new debt program."

European funding concerns

The main worry among other European nations and investors is how Italy, the eurozone's second most debt-laden country, can fund the coalition's proposals, which some experts have estimated will cost at 100 billion euros.

The program for government features billions of euros in tax cuts and a monthly basic income for some nine million people, as well as pledges on hardline immigration, security, and pension reform.

Italian stocks fell by 1.5 percent on Friday, with CMC Markets strategist David Madden telling Reuters that the coalition agenda was "shaking investor confidence."

Five Star became Italy's largest party at the March elections, gaining nearly 33 percent of the vote, while the League – shorn of the rest of the right-wing coalition that won 37 percent – will be the junior coalition partner with 17 percent.

(With input from agencies)