Italy's PM-designate Giuseppe Conte fails to form populist government

Italy's PM-designate Giuseppe Conte fails to form populist government

Italy's president has formally asked economist Carlo Cottarelli to try to form a government after quashing the hopes of the euroskeptic 5-Star Movement and the League to form Western Europe's first populist government.

The coalition had wanted to place 81-year-old economist Paolo Savona in charge of Italy's economy, although the former industry minister has been a key figure in questioning Italy's participation in the eurozone and the budgetary restrictions the European Union requires of its members.

"The adhesion to the euro is a choice of fundamental importance for the perspectives of our country and our youth", Mattarella said. "If you want to discuss it, it should have been done openly and with a serious debate", which he noted hadn't been part of the electoral campaign.

The prospect of Italy's government going on a spending spree on promised tax cuts and welfare benefits roiled markets last week.

After the coalition's collapse, Italian bonds, stocks and the euro rallied. The spread between Italian and German 10-year bonds reached the widest in over four years as polls suggest the populists can only benefit from the chaos. It trimmed some gains to stand 0.4 percent up on the day at $1.1696.

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Explaining his opposition, the president said that it was his constitutional...

"Although it would be disrespectful to Italians if this government doesn't get started because it's unpleasant to someone in Berlin or Brussels".

"I have agreed and accepted all the nominations, except that of the minister of economy", Mr Mattarella said in a sombre, televised speech.

A technical government will still be subject to votes of confidence in both houses of Parliament, and the Five Star Movement and League made clear Mr Cottarelli would not have their support. Such a call is usually a prelude to being offered a mandate to form a government.

An administration led by Cottarelli would likely only be a short-term solution because the majority of parliamentarians have said they would not support a technocrat government.

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"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.

French president Emmanuel Macron was the first leader to express encouragement to Conte. "We will soon vote on the budget law and will understand what will happen", another 5-Star source said. The Democratic Party won about 20 percent of the vote. The political mainstream is widely blamed by Italians for a sluggish economy, high unemployment and rising poverty - not to mention the migration crisis of recent years.

The two populist parties attempting to form a coalition in Italy had pushed for Savona to be appointed to the pivotal role.

Mr Mattarella's office declined to reveal his plans.

Italian President Mattarella addresses the European Parliament in Strasbourg.

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"We need to keep cool".

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