Italy inches toward new govt as Trump backs Conte's return as PM

Italy inches toward new govt as Trump backs Conte
# 28 August 2019 05:01 (UTC +04:00)

The two parties trying to form a new Italian government made progress toward a coalition deal on Tuesday, cheering financial markets as well as U.S. President Donald Trump, who said he hoped Giuseppe Conte would be reinstated as prime minister, APA reports citing Bloomberg.

The role of Conte has been a sticking point in the negotiations between the 5-Star Movement, a member of the outgoing coalition, and the opposition Democratic Party (PD), which has been resisting his reappointment.

“Starting to look good for the highly respected Prime Minister of the Italian Republic, Giuseppe Conte,” Trump said on Twitter. “A very talented man who will hopefully remain Prime Minister.”

After setbacks early on Tuesday the roller-coaster talks between the anti-establishment 5-Star and the center-left PD appeared to be back on track later in the day, with upbeat comments from both sides prompting a strong market rally.

Italian 10-year bond yields fell to three-year lows, and the spread between German Bunds narrowed to below 182 basis points, the tightest since May 2018.

Tensions persist and surprises are possible, however.

Late on Tuesday, a PD source said talks were still at risk of failure over the post of deputy prime minister, saying 5-Star leader Luigi Di Maio was insisting on retaining that role in a new coalition despite strong opposition to this from the PD.

Even if a deal were struck, it would need to survive an online vote of 5-Star party members, the party said in a blog post. Many of its rank and file are hostile to the PD and have used social media to urge Di Maio against doing a deal.

Investors, though, are betting that Italy will avoid snap elections, fearing they would be won by Matteo Salvini’s hard-right League party, which would put Rome on a collision course with the European Union over expansionary government spending.

“Our work is continuing in a fruitful way,” the PD’s Senate leader Andrea Marcucci told reporters in brief comments after an evening meeting with 5-Star officials.

Deputy PD leader Paola De Micheli said the two sides had “analyzed points for the basis of a common program”, while 5-Star’s Senate chief Stefano Patuanelli reported a “good climate” and said contacts would continue on Wednesday.

The parties are due to report back to President Sergio Mattarella on Wednesday from 1400 GMT. If no deal has been sealed he will name a caretaker government and call elections.

Conte, who belongs to no party but is close to 5-Star, resigned last week after League chief Salvini declared his 14-month coalition with 5-Star was dead, seeking to trigger elections and capitalize on his surging popularity.

The move has not gone to plan, as 5-Star and the PD seek to form a coalition of their own, pushing the League into opposition.