Italy’s president yesterday asked Giuseppe Conte to head up a coalition of the 5-Star Movement and opposition Democratic Party (PD), a move could that could improve in Italy’s fractious relations with the European Union.
Markets welcomed the quick end to a three week political crisis triggered by League leader Matteo Salvini, who pulled his hard-right party out of its governing alliance with 5-Star after weeks of public bickering.
Salvini had wanted fresh polls to capitalise on his party’s success in European elections but his plan backfired as 5-Star and the PD, lagging the League in opinion surveys, set aside their long-standing antipathy to form a government.
Italy’s 10-year borrowing costs fell to an all-time low at auction on Thursday on the news as the prospect of a snap election retreated.
Conte, who told reporters he would present a cabinet list to the president in the coming days, said his priority was to draft a 2020 budget.
“We must immediately get to work and draw up a budget to avert the VAT hike, protects savers and offers solid prospects for economic growth and social development,” he said.
VAT will rise from Jan 1 unless the government can find 23 billion euros ($26 billion) elsewhere.
The creation of a new government is not yet a done deal, however, and the two parties still need to agree a shared policy platform and divide up cabinet posts.
In a further complication, 5-Star has promised to put the deal with the PD to an online vote of its members. Many 5-Star supporters oppose a pact with the centre-left and a ‘yes’ vote is not a certainty.