Published: Thu, May 17, 2018
Worldwide | By Jermaine Blake

Italy's Fanciful Coalition Draft Draws Investors' Incredulity-For Now

Italy's Fanciful Coalition Draft Draws Investors' Incredulity-For Now

However, the far-right League, which is in talks with the anti-establishment 5-Star Movement in order to form a new government, has called for tougher migrant policies.

Matteo Salvini is the leader of the Northern League.

"First must come the things that need doing, and only afterwards (we need worry about) absurd rules written many years ago when the world was totally different", he said.

The far-right leader of the Lega, Matteo Salvini, and the leader of the anti-establishment 5-Star Movement (M5S), Luigi Di Maio, talked about European Union "interference" on Tuesday.

Salvini and Di Maio have both agreed to drop their own ambitions to be prime minister and are looking for a candidate from outside their parties to enact their program.

Salvini accused the Commission of "unacceptable interference".

Late Tuesday, a draft coalition program leaked.

FILE - 5-Star Movement's leader Luigi Di Maio arrives for a press conference on the preliminary election results, in Rome, March 5, 2018.

Both parties are keen to make good on their election promises and before the polls, M5S and the League both blamed the EU's overbearing rules for Italy's chronically weak growth, rising poverty, and voter resentment.

5-Star leader Luigi Di Maio
Italy's Fanciful Coalition Draft Draws Investors' Incredulity-For Now

Italy's 10-year bond yield jumped almost 19 basis points to 2.13 percent, its highest level since early March and the biggest one-day rise since March 2017, while Italian bluechip stocks fell 2.5 percent.

They have both vowed to scrap an unpopular pension reform - a move that would punch a 15-billion-euro (RM70 million) hole in state coffers.

Italy has the second highest public debt in the eurozone.

Salvini dismissed concerns about the widening gap, or spread, between Italy's benchmark bonds and safer German ones as a sign the two potential partners were on the right track.

On Wednesday morning Salvini said that negotiations were nearing conclusion, while Di Maio confirmed the two parties could wrap up the "contract of government" within the day.

It could lead to a spate of Eurosceptic, populist parties making promises to clear European Union debt.

Then, European Commission Vice President Valdis Dombrovskis said Italy must continue to respect its commitments to the EU, including pledges to cut its big public debt, regardless of who takes over the helm of the new government in Rome. But some of the details will alarm the European Union.

They had been widely expected to unveil a deal at a meeting with President Sergio Mattarella on Monday, but in the event had to ask for more time after differences emerged over policies and over who should head any new administration.

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