Italy’s two anti-system parties on Wednesday appeared on the verge of clinching a deal to form a coalition government after 2-1/2 months of stalemate, rattling markets with radical ideas to free up billions of euros for tax cuts and welfare.
The far-right League and the 5-Star Movement have been discussing a common policy agenda for a week after a March 4 election ended in a hung parliament.
|FILE PHOTO: Anti-establishment 5-Star Movement leader Luigi Di Maio speaks following a talk with Italian President Sergio Mattarella at the Quirinal Palace in Rome, Italy, April 12, 2018. REUTERS/Max Rossi/File Photo
“It would be crazy to give up at the moment of truth,” League leader Matteo Salvini said in a live video stream on Facebook, adding that he would not be intimidated by negative reaction from financial markets or attacks from the media.
“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.
A definitive program should be completed by the end of the day, Salvini said, adding that the two parties would update Italian President Sergio Mattarella on their attempt to build a government by Monday.
There was still no word on the thorny issue of who would be prime minister. Neither Salvini nor 5-Star leader Luigi Di Maio want the other to get the job, but they have yet to propose a mutually acceptable alternative figure.
Late on Tuesday, a draft coalition program leaked. In it, the parties said they planned to ask the European Central Bank to forgive 250 billion euros ($296 billion) of Italian debt purchased under the euro zone central bank’s quantitative easing (QE) program.
Italian bond yields and the cost of insuring Italy’s debt against default jumped on the news even after Claudio Borghi, the League’s economics chief, told Reuters the request for debt forgiveness was never in an official draft of their program.
He said the leaked version was “only some notes”, while what the parties want is for the European Union not to account for bonds bought by the ECB under QE when calculating a country’s official debt levels for the purposes of the EU Stability Pact.
The euro fell to a five-week low against the dollar, and Italy’s benchmark 10-year bond was set for its biggest one-day gain since July of last year.