Published: Fri, May 18, 2018
Global Media | By Garry Long

Italy's 5-star, League finish policy program, pass to leaders

Italy's 5-star, League finish policy program, pass to leaders

Back in the currency markets, sterling rallied against both the dollar and the euro after a United Kingdom newspaper reported that Prime Minister Theresa May would tell Brussels that Britain was prepared to stay in the European Union's customs union after a transitional arrangement beyond 2021.

Italian far-right leader Matteo Salvini launched a broadside at the European Union as he closed in on a coalition government deal with the anti-establishment Five Star Movement on Wednesday, saying that he would rather be a "barbarian than a slave" to Brussels. In it, the parties said they planned to ask the ECB to forgive 250 billion euros ($296 billion) of Italian debt purchased under the euro zone central bank's quantitative easing (QE) program.

Silvio Berlusconi, 81, was eclipsed as leader of the centre-right by the more hard-line League.

The report spooked markets, even though the League's economic spokesman told Reuters that debt cancellation was never in an official draft of a government program. Italy's 10-year bond yield climbed almost 19 basis points to 2.13 percent and that was its highest level since early March and the biggest one-day rise since March 2017. The ideas in the draft programme underscore the great difficulties in finding the resources needed to pay for promises the two rival parties made to their voters during the campaign.

News of the draft accord has caused concern in Brussels, where European Commission Vice President Valdis Dombrovskis told the EU parliament on Thursday that Italy's new government should stick to fiscal discipline and keep reducing public debt. 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.

It proposes that European Union sanctions against Russian Federation be dropped immediately, and includes a watered-down EU section that no longer talks about exiting the single currency but asks that unspecified "certain responsibilities" be repatriated to individual member states.

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"European economic governance. must be rethought. including the single currency, in the name of a return to the pre-Maastricht spirit", says the latest version of the 40-page, 29-point draft document published on La Repubblica newspaper's online edition.

The emerging M5S-Lega coalition government is also demanding a revision of the Dublin rules that call for migrants to apply for asylum in the country of entry, while that await a decision on a possible resettlement.

It is likely to cause concern in Brussels and at European Central Bank headquarters in Frankfurt and might also dismay Italian President Sergio Mattarella, who has stressed the importance of the country maintaining a strong, pro-European stance.

Both parties have a history of Euroscepticism.

The League-Five Star draft document also states their "intention to oppose" worldwide trade treaties such as the EU-Canada Comprehensive Economic and Trade Agreement (CETA), the Transatlantic Trade and Investment Partnership (TTIP), and ongoing negotiations to grant China market economy status (MES). 5-Star has moderated its position considerably in the past year, rowing back on a previous plan to hold a referendum on Italy's membership of the currency bloc.

Both parties plan to consult supporters over the weekend to see if they back the government pact.

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