Published: Thu, May 31, 2018
Markets | By Erika Turner

Cottarelli named interim Italian prime minister

Cottarelli named interim Italian prime minister

Italy's president on Monday named a former International Monetary Fund economist as caretaker prime minister to lead the country into new elections, possibly as soon as the autumn, after a political storm whipped up by the collapse of a populist bid for government.

Another vote - following elections held on March 4 - seemed a sure thing at the start of the week as President Sergio Mattarella attempted to install a technocratic government.

Italy has now been without a government since March, when its elections failed to produce a party capable of forming government on its own.

President Sergio Mattarella had vetoed the parties' choice of a eurosceptic as economy minister, prompting the Five Star Movement and far-right League party to accuse the president of betraying voters and to drop their plan to take power.

Sergio Mattarella, the Italian president, who would have to formally approve the new government's leader and slate of ministers, signalled on Wednesday evening that he was ready to install a technocratic government if a deal could not be reached, but chose to give Di Maio and Salvini more time to draw up a list of ministers that could be accepted by all parties.

Di Maio and the League's Matteo Salvini are using the interim to pile pressure on the president who upset their bid for power by vetoing a euro-skeptic candidate for the job of finance minister.

The prospect of a populist government running Italy had already caused turmoil in financial markets, over fear that the coalition would unleash a spending splurge and increase Italy's massive debt mountain - the equivalent of more than 1.3 times the nation's domestic output.

Luigi di Maio, leader of the Five Star Movement, said fresh elections are inevitable unless his choice of prime minister is given the green light.

In the latest twist, Di Maio said Wednesday he's willing to suggest a different finance minister. "It's a lie invented by Mattarella's advisors", Di Maio said in a live video on Facebook.

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That is what ultimately happened after Mattarella on Sunday night refused to approve the populists' choice of an economy minister who has raised the spectre of Italy having to someday exit from the euro, the European Union currency shared by 19 countries.

After that, Mr Mattarella would dissolve Parliament and set elections for 2019, Mr Cottarelli said.

Salvini, who has been blowing hot and cold on reviving the populist government project, told a rally in Genoa in northern Italy: "If it's wanted, there's a government contract with a team which is ready".

Their fury was backed by populists across Europe who were incensed that Mr Mattarella had apparently bowed to pressure from the financial markets and leading French, German and European Commission figures warning against Italy breaking EU budget rules.

According to the Italian constitution, the president nominates both the prime minister and, following proposals from the premier, the cabinet.

Marine Le Pen, the French National Front leader, said Mr Mattarella's decision amounted to a "coup d'etat" while Steve Bannon, Donald Trump's former strategist, called the last 48 hours of political events in Italy "disgusting".

"The next elections will be a plebiscite - the population and real life against old political castes and the "lords of the spread", he said.

The FTSE 100 edged up 0.12 per cent in morning trading, while the FTSE 250 was up 0.14 per cent. Germany's Dax rose 0.3 per cent.

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