Monday 17 / June / 2024
Rome:The prospect of a government composed of the anti-system 5-Star Movement and the far-right League, seen by many investors as an alarming scenario before an election two months ago, looked increasingly likely for Italy on Wednesday.
President Sergio Mattarella said he would delay naming a prime minister for 24 hours after 5-Star and the League told him they were holding last-minute talks to try to clinch a coalition deal.
The leaders of the two largest groups in parliament met on Wednesday to try to break the deadlock which followed a March 4 inconclusive election. Mattarella had been expected to name a prime minister later in the day to head what he had called a "neutral" government.
But both 5-Star and the League have said they would not back such an administration, depriving it of the chance to win a necessary confidence vote and raising the prospect of a repeat vote this year.
The March ballot produced a hung parliament, with a conservative alliance led by the League winning most seats in parliament and 5-Star emerging as the biggest single party.
5-Star has repeatedly offered to form a government with the League but only on condition that it breaks from its ally Forza Italia, led by the scandal-plagued former prime minister Silvio Berlusconi.
The League's leader Matteo Salvini has so far refused to do this in the name of loyalty to the centre-right alliance, but has been putting pressure on Berlusconi to voluntarily stand aside to allow him to form a government with 5-Star.
5-Star views the 81-year-old Berlusconi, who has a conviction for tax fraud and is on trial for allegedly bribing witnesses, as a symbol of political corruption.
Lorenzo Codogno, head of LC Macro Advisors and former chief economist at the Italian treasury, said market reaction to a government of 5-Star and League would be negative.
"An ant-establishment, anti-euro (though somewhat watered down) and anti-austerity government would not bode well for Italian financial assets," he said.
Salvini and 5-Star's leader Luigi Di Maio have called for a snap election in July. If that happens, Berlusconi's Forza Italia party would haemorrhage more votes to the increasingly popular League, recent polls indicate.
Italian markets fell sharply on Tuesday as investors feared a new election would further benefit the League and 5-Star at the expense of mainstream groups. Markets were little-changed on Wednesday following the news a deal between the parties may be in the offing.
Berlusconi denied on Tuesday that he was willing to stand aside to enable 5-Star and the League to launch a government, after three senior sources in his party told Reuters he was considering it.
However, Italian media have reported that the media magnate is facing pressure not only from the League but also from many Forza Italia parliamentarians who fear they would not be re-elected in a repeat vote in the summer.
Giovanni Toti, the Forza Italia president of the north-western Liguria region, on Tuesday publicly urged Berlusconi to allow 5-Star and the League to launch a government. The earliest possible date for an election would be July 22, when many Italians will be on holiday, meaning turnout could slump. Italy traditionally holds its national elections in the spring and the latest it has ever voted was June 26, in 1983. Even if Berlusconi stands aside, government talks between Di Maio and Salvini will not be simple.
On Sunday, the 31-year-old Di Maio withdrew his previous insistence that he should be prime minister, saying instead that he and Salvini should pick a mutually acceptable figure.
Italy's economy is slowing, recent data suggests, and the first task of any new government will be to work on a 2019 budget to stave off the threat of an automatic increase in sales taxes that would be triggered because of missed deficit targets.
