M5S and League close to final deal, but PM 'not decided yet'

Frederick Owens
May 18, 2018

However, the far-right League, which is in talks with the anti-establishment 5-Star Movement in order to form a new government, has called for tougher migrant policies.

The 39-page document, obtained by Huffington Post Italia, also calls for a renegotiation of Italy's European Union budget contributions, an end to sanctions against Russian Federation and plans to dismantle a 2011 pension reform that raised the retirement age.

A draft of their proposed German-style coalition contract - dated Monday morning - featured a proposal for "specific technical procedures" that would allow countries to leave the single currency and recover "monetary sovereignty".

Ratings agency DBRS warned that the parties' proposals could threaten Italy's sovereign credit rating and comments by the League's economics chief sparked a plunge in the share price of troubled bank Monte dei Paschi di Siena.

Five Star and League officials denied on Wednesday that a leaked version of their draft government programme represents a definitive statement of their plans for government.

"In short, trust towards Italy is bound to face heavy tests under a M5S/LN government, even if the two parties will not be able to implement their program in full", he said.

The League and 5-Star have failed to agree on forming a coalition between themselves after an inconclusive election on March 4, but they have enough votes together in parliament to block any other government from taking office.

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Speaking to CNBC, the Investment Director at Fidelity International claimed Italy's new government coalition between Lega leader Matteo Salvini and Five Star Movement leader Luigi Di Maio will cause a huge fight with Brussels amid major European Union reform demands.

Both leaders said the final policy document would be put to their voters before being submitted to the president, Sergio Mattarella, who has the final say on the contract, prime minister and cabinet lineup. While the two parties specified they had removed the section on possibly opting out of the euro, they made no mention about the suggestion the European Central Bank should write off this debt. Both groups have a history of euroscepticism.

Moments earlier, a 5-Star source had said the programme had been substantially agreed and that it contained no reference to a possible exit from the euro or "anything that could cause any concern regarding Italy's euro membership". 5-Star has moderated its position over the a year ago, but the League still wants to leave the eurozone as soon as politically feasible.

The leader of Italy's anti-establishment 5-Star Movement took his campaign for a referendum on the euro to Brussels on Wednesday, holding out the prospect of cooperating with other anti-euro parties. Plans to leave the euro appear to have been dropped while the latest accord could see them instead seek a "debt discount".

On the question of prime minister, he said: "We are still working that out".

Other policies reported to have made it into the latest version include a pledge to withdraw sanctions against Russian Federation and an attempt to renegotiate European Union treaties, including the Dublin accord on asylum seekers, while upping the expulsion of illegal immigrants.

Salvini taunted Brussels by warning that if European Union capitals were concerned, "then we're doing something right".

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