What's next for Italy as populists take charge?

Rome (AFP) –


Italy's proposed coalition government has promised a mix of far-right, anti-establishment and eurosceptic policies, leaving the international community wondering what the future holds for the eurozone's third largest economy.

Here are answers to five pressing questions as the League and Five Star Movement (M5S) prepare to take charge.

- Could Italy leave the euro? -

Despite outspoken criticism of the European Union from both parties, the final version of the M5S-League government programme does not mention a unilateral exit from the eurozone.

M5S abandoned their idea of a referendum on the euro and while the League has called the currency "a failed economic and social experiment," the party has proposed a series of reforms and an eventual coordinated group exit along with a number of other countries in the long term.

- Who is really in charge? -

M5S hold more clout in the new coalition having won almost 33 percent in March's election, compared to the League's 17 percent -- even if League leader Matteo Salvini claims to represent the 37 percent who voted for his rightwing coalition.

While Salvini is the undisputed top dog of the League, the shadow of M5S founder Beppe Grillo, an outspoken former comedian, still looms large over the party led by Luigi Di Maio.

A question mark also hangs over the fate of flamboyant former premier Silvio Berlusconi. Part of the rightwing alliance with Salvini, Berlusconi begrudgingly gave the green light for the League and M5s to make a deal without his Forza Italia party.

But the ageing media tycoon disapproves of the new government programme and, after a recent court ruling overturned a ban on him holding public office, could once again be able to exert influence from inside parliament -- if a member of his party offers up their seat.

Never afraid of a long shot, Berlusconi has also offered himself up as a potential future premier.

- Long-term partnership? -

Both Di Maio and Salvini insist that they want to create a coalition that can last the full five-year mandate and implement their programme.

But their parties only have a wafer-thin six vote majority in the Senate, which holds the same power as the Chamber of Deputies, where they have a 32-vote majority.

The two parties will have to hold onto their MPs -- especially those who view the new alliance with scepticism -- to go the distance.

- How will markets respond? -

A tumultuous campaign, inconclusive elections and a prolonged period of political deadlock meant that financial markets were already nervous, especially faced with the possibility of a return to the polls.

So the prospect of a M5S-League accord was initially met with some relief -- until the coalition revealed their government programme.

In response to the document's costly financial measures and eurosceptic tone, key financial indicators pointed to decreasing investor confidence in Italy.

The difference in yield between Italian and German 10-year government bonds has gained 40 points in less than a week, increasing to 170 points.

- What can the president do? -

Italy's president Sergio Mattarella has the power to veto ministers and reject any law deemed financially non-viable for the country.

He is also the guarantor of Italy's international commitments and will keep a close eye on any move to modify the country's role on the world stage, especially given Salvini's scathing comments about the EU and praise for Russian leader Vladimir Putin.