Italy PM-designate holding "informal talks" with president

Standoff drags on in Italy over new economy minister

Standoff drags on in Italy over new economy minister

Italy's Prime Minister-designate Giuseppe Conte gave up on efforts to form a government on Sunday after the president apparently rejected his pick for the economy ministry, increasing the likelihood of another election this year.

President Sergio Mattarella's veto of 81-year-old eurosceptic Paolo Savona as economy minister appeared to tip the country back towards repeat elections and triggered a dramatic speculative attack on Italian financial markets.

The leader of Italy's biggest political party has called for the president to be impeached after he vetoed a choice for finance minister.

The two populist parties that prevailed in the March 4 vote - the euroskeptic 5-Star Movement and the right-wing League - presented their proposed Cabinet over the weekend.

Italian government bond yields fell from multi-year highs today, as a renewed attempt to form a government in Rome and a smooth bond auction brought a degree of calm to a market battered in recent days by political crisis.

Salvini said that the centre-right coalition will collapse if Silvio Berlusconi's Forza Italia backs an interim government led by former spending review chief Carlo Cottarelli. The 10-year yield rose to near 3 percent, according to FactSet.

"What a bad day for Italy and for democracy", Salvini said in a Facebook post on Sunday, following Mattarella's decision to veto Paolo Savona's nomination for the post of economy minister.

In Sunday's statement Savona did not refer to his opinions on the euro, but more than 70 slides outlining a "plan B" for Italy's exit from the euro, co-authored by Savona in 2015 with a dozen others, circulated on social media.

"I have given up my mandate to form the government of change", said lawyer and political novice Giuseppe Conte, 53, plunging the country into a political crisis almost three months after March's inconclusive general election.

Mattarella said that he has done "everything possible" to aid the formation of a government, but that an openly eurosceptic economy minister ran against the parties' joint promise to simply "change Europe for the better from an Italian point of view".

The parliamentary election, held on March 4, failed to produce a clear victor but saw support for traditional parties collapse.

French president Emmanuel Macron defended what he called Mattarella's courage and German chancellor Angela Merkel spoke of the need to obey rules governing the euro.

He rejected that argument saying Italy isn't structurally weaker than Germany, but that the message needed to be underlined that "if we want to share currency, we need to behave in a different way".

"A continuing sharp sell-off may force Italy to clarify its political situation fast, ideally with the radicals vying for power clarifying for good that they would not jeopardize Italy's position in the euro", said economist Holger Schmieding at Berenberg bank.

On Sunday, Bannon met with Armando Siri, the mastermind behind the coalition's economic reform program, centred on a 15 per cent flat tax created to replace Italy's Byzantine fiscal code and significantly curb the tax evasion that is rife in the country.

He will struggle to gain the approval of parliament with Five Star and the League commanding a majority in both houses. Italy has never before had a July election: the timing, during the traditional summer holiday season, could affect turnout significantly, and the short notice might cause problems for Italian voters living overseas.

The 5-Star's Di Maio demanded impeachment under article 90 of the constitution.

A poll conducted by the European Commission in November 2017 showed that nearly 59 per cent of Italians were in favour of an economic and monetary union in Europe with one single currency. It would be a disaster for the union at a time when Britain has voted to leave it.

"We are part of a very large and deeply integrated economic area, whose development determines that of Italy and at the same time depends on it", he said.

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