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Italy’s premier-designate steps down after failed Cabinet talks

28 May 2018

Italy's president was accused last night of pandering to Brussels and the markets after he vetoed western Europe's first populist government.

Italy's novice premier-designate Giuseppe Conte struggled to form a populist government throughout the weekend, stranded between a president who objects to a eurosceptic candidate for the economy ministry and a coalition ally threatening to force early elections.

Meanwhile, European equities markets rose this morning.

There is now a real argument between the president and the populists about Italy's position in the European Union, he adds.

Savona's criticism of the euro and German economic policy has further spooked markets already concerned about the future government's willingness to reign in the massive debt, worth 1.3 times its annual output.

His decision to exercise this right, which is enshrined in Article 92 of the Italian constitution, enraged the far-right League of Matteo Salvini and the anti-establishment Five Star Movement of Luigi Di Maio.

After the coalition's collapse, Italian bonds, stocks and the euro rallied.

Italian 10-year government bond yields dropped 10 basis points to 2.35 per cent in early trade, coming off one-year highs, while two-year yields fell as much as 17 basis points and were set for their biggest daily drop in three years, coming off three and a half year highs hit on Friday.

Italian media speculated that, in the meantime, Mattarella could try to appoint a technocratic government.

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The divisive political landscape in the crisis-hit country has quickly escalated, with the leader of Italy's Five Star Movement calling on parliament to impeach the President.

On Sunday, Bannon met with Armando Siri, the mastermind behind the coalition's economic reform program, centred on a 15 per cent flat tax created to replace Italy's Byzantine fiscal code and significantly curb the tax evasion that is rife in the country.

"I accepted every proposed minister apart from the minister of the economy", Mattarella told reporters. He added that the League and 5-Star had refused to put forward any other name for the role.

Mr Cottarelli, known as "Mr Scissors", has been summoned for talks with the president later Monday.

Mr Cottarelli, for his part, is an economist who assisted a former centre-left government in slashing public spending.

French president Emmanuel Macron was the first leader to express encouragement to Conte.

On Monday, Salvini said in a radio interview he would seek parliamentary support from 5-Star to change the electoral law.

The country is now expected to go to the polls again in the autumn. The Democratic Party won about 20 percent of the vote.

"I was informed of the request by the political parties to hold an early election". Under that clause, parliament can demand a president leave office if a simple majority of lawmakers votes in favor.

Italy’s premier-designate steps down after failed Cabinet talks