Talks are under way between the anti-establishment Five Star Movement and the far-right League, which leads Italy’s centre-right alliance, to form a Eurosceptic government in the eurozone’s third-biggest economy.
The March 4 election resulted in a hung parliament, with the centre-right alliance ahead of Five Star, but both short of a majority of parliamentary seats.
Sergio Mattarella, Italy’s president, said on Monday he was ready to name a neutral caretaker administration until the end of the year. Mr Mattarella agreed earlier on Wednesday to hold off on his plan for 24 hours after the League and Five Star informed him they were holding last-minute talks to try to reach a coalition deal.
Luigi Di Maio, the Five Star leader, had insisted on the League breaking with its junior ally, Silvio Berlusconi’s centre-right Forza Italia party, arguing the media mogul represented the political establishment. Matteo Salvini, the League leader, had refused to break with Mr Berlusconi through two months of negotiations. The scandal-ridden former prime minister said on Wednesday that he would not oppose an alliance between the League and Five Star, removing the main obstacle to a Five Star-League tie-up.
Should negotiations between the two Eurosceptic parties fail, Mr Mattarella is still expected to proceed to nominating a caretaker administration to replace the incumbent centre-left government, despite pledges by Five Star and the League to vote against a non-partisan prime minister.
A populist administration has long been considered the most destabilising outcome of the March election as both Five Star and the League have vowed to defy EU budget rules, on the grounds that austerity has damaged Italy, and have been critical of the new EU banking rules.
The yield on Italy’s 10-year bond, an important measure of investor confidence, increased 3 basis points to 1.91 per cent, a six-week high.
Photo: © European Union 2017 – European Parliament
