Italy's 5-Star, League reach final coalition deal, unveil government program

Pauline Gross
May 18, 2018

"The more they insult us, the more they threaten us, the more they blackmail us, the more desire I have to embark on this challenge", he said.

"The government's actions will target a program of public debt reduction not through revenue based on taxes and austerity, policies that have not achieved their goal, but rather through increased GDP by the revival of internal demand", the document reads.

Hours after the document leak, 5-Star and the League issued a further joint statement saying they wanted to "reconsider" the euro zone's fiscal rules with Italy's partners "in the spirit of returning to the pre-Maastricht set-up" - a reference to the treaty which laid the groundwork for monetary union. This was partly out of a belief that while they would push Brussels to relax fiscal rules - not unlike Italian governments of the past, and other European Union governments such as France and Spain - they would not seek to pull their country out of the single currency.

That was enough to spook Italian markets, even though the League's economic spokesman told Reuters that debt cancellation was never in an official draft of a government programme.

The two parties have been locked in talks to reach a coalition government agreement and bring an end to two months of political deadlock following inconclusive elections.

There were tremors across Europe on Wednesday after a draft of their plan published by Huffington Post Italy revealed proposals to ask the European central bank to wipe out €250bn of debt as well as set up procedures allowing EU member states to exit the euro.

It was not clear when these and other measures would be adopted, and there was still no word on the thorny issue of who would be prime minister.

Besides the differences on migrant policy, Salvini also cited the League's promise to reform Italy's slow-moving justice system. 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.

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The Commission, with just a year of its term remaining, "can't really do much other than put Italy's finances under greater scrutiny, and markets don't care about that", he said.

According to Italian media reports, their nominee for Prime Minister is likely be from a "third party" and will have to be able to make the eurosceptic nature of the new government workable with Brussels.

"The European Union would not be complete without the Italian nation", Juncker said.

Berlusconi has refused to govern with the 5-Stars, who he regards as "more unsafe than communists".

President Sergio Mattarella must still confer a mandate on a proposed candidate for premier, whose government and program must win votes of confidence in both houses of parliament. 5-Star has moderated its position over the a year ago, but the League still wants to leave the eurozone as soon as politically feasible.

Francesco Galietti, head of the Policy Sonar political risk consultancy, described the nascent coalition's economic policies as "a pretty spicy dish", but he said investors were pleased to see that Italy was managing to form a government.

They are now using less strident tones, and a 5-Star official said on Friday any plans to raise the budget deficit will first be discussed with Brussels in a "courteous" way.

Other reports by GizPress

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