Italian populists launch bid to resurrect government coalition

Rome (AFP) –


Italy's populist parties launched a last-ditch bid Thursday to resurrect a coalition government that collapsed as the president vetoed their controversial pick for economy minister.

Luigi Di Maio, head of the anti-establishment Five Star Movement, said Wednesday he was prepared to offer a compromise candidate in the place of economist Paolo Savona, who has called for Italy to drop the euro.

It would be an olive branch to President Sergio Mattarella, who at the weekend ruled out approving the coalition's cabinet lineup if it included Savona -- prompting Di Maio to demand the president's impeachment.

Nearly three months of political turmoil following an inconclusive election in the eurozone's third biggest economy have rattled financial markets, although they rebounded slightly on Wednesday and Thursday.

The Milan Stock Exchange was up 0.79 percent by 1100 GMT after closing up 2.09 percent Wednesday while the bond market continued to strengthen.

Investors have deep doubts over Italy's financial stability, with the country struggling under a debt mountain of 2.3 trillion euros.

Popular support has soared for the nationalist League party, Five Star's more powerful coalition partner, leading many to fear that fresh elections could essentially become a referendum on euro membership.

Mattarella has asked pro-austerity economist Carlo Cottarelli to form a caretaker government, but now says he is assessing Di Maio's offer of a compromise with "great interest".

The League has been beating the drum for new elections, but its leader Matteo Salvini said Wednesday he had "never closed the door" on hammering out a government.

Salvini, 45, and the 31-year-old Di Maio were to meet later Thursday in Rome.

Cottarelli meanwhile has a caretaker team ready to step in should the Five Star-League negotiations fail -- but the lineup is doomed to lose a confidence vote in the populist-dominated parliament, meaning that elections would likely be held after August.

The timing of polls is already the subject of heated debate, with the centre-left Democratic Party saying they should be held in July while the League says they should take place after the summer holidays.

But if they are held in September or October, parliament would have scant time to approve the 2019 budget.

- Banks on ratings watch -

The uncertainty prompted Moody's to place a dozen Italian banks on negative ratings watch Wednesday, including Intesa Sanpaolo, UniCredit and Mediobanca, having already Friday placed Italy's Baa2 rating on review for a possible downgrade over its political crisis.

Fuel giant Eni, postal service Poste Italiane, public TV network RAI and gas companies Snam and Itaglas were also put under surveillance by Moody's.

More than half of ordinary Italians -- 54 percent -- are "worried" about the political situation, according to a survey conducted Tuesday and Wednesday by the Demopolis Institute.

Thirty percent are "angry" and 11 percent "disappointed", with only five percent feeling "confident", the poll found.

"We are in a surreal situation, every morning for 88 days we wake up and we are amazed at the U-turns and flip-flops for which we are all paying a price, not only economically but in credibility and confidence," wrote left-leaning La Repubblica editor Mario Calabresi.

In the same paper Lupo Rattazzi, scion of the powerful Agnelli family that owns car manufacturer Fiat, took out a full-page advert challenging Di Maio and Salvini over Savona's position on the euro.

Rattazzi noted that Savona has admitted that leaving the euro would damage Italians' purchasing power for two years, and that the "upper and middle classes" would benefit the most.

On Wednesday, current affairs programme "Porta a Porta" highlighted two polls carried out by Istituto Piepoli and Euromedia both showing that a large majority of Italians want to stay in the euro.