Italian populists seal coalition pact in challenge to European Union elites

Marsha Scott
May 18, 2018

The joint programme will be put to Five Star members, who will vote on the contents of the document via the party's "Rousseau" website which is used for major decisions. Di Maio said it will take place Friday from 10 am to 8 pm local time.

The policies would cost many billions of euros and have spooked investors in Italian debt, shares and the euro.

Luigi Di Maio is the leader of the 5-Star Movement.

The head of state has made it clear that he will only look at the definitive version of the text, after a draft leaked earlier this week caused consternation with proposals that would allow Italy to leave the euro, demand financial concessions from the European Union and withdraw sanctions on Russian Federation.

Italy's populist parties considered asking the European Central Bank to write off 250 billion euro of the country's debt, which the bank is due to hold after the end of its quantitative easing bond-buying programme, and called for the creation of a mechanism to allow member states to ditch the euro and recover their own monetary sovereignty, suggesting they would abandon the fiscal rules underpinning the euro once in government. But with Italy's public debt at more than 130% of GDP, the measures will be hard to achieve, undoubtedly leading to clashes with the EU.

Instead of debt forgiveness, 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's Stability Pact, Borghi said.

The pan-European FTSEurofirst 300 stock index rose 0.62 percent, while Italy's benchmark index bounced 0.3 percent following heavy losses on Wednesday on concerns that a new government could relax fiscal discipline.

European bond yields generally were also rising along with US peers as investors eyed political risk in Italy.

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A previous draft dated May 14 and leaked to the press said Italy should request a 250-billion-euro debt cut from the European Central Bank, which prompted the Milan-based stock exchange to plunge by 2.32 percent and pushed the spread to 151 basis points (from 130 points Tuesday) at Wednesday's close.

"This is our message to the new government".

"If they say yes to my proposals, I'll be happy to stay in Europe with a goal". Di Maio, 31, said earlier this week that tax evaders would be jailed.

A 5-Star source had said the program contained no reference to a possible exit from the euro or "anything that could cause any concern regarding Italy's euro membership".

The duo will be under pressure to deliver the costly economic promises made to an austerity-weary electorate, such as cutting taxes, introducing a universal basic income and scrapping a 2011 pension reform that increased the retirement age. Economists say this would cost well over 50 billion euros (RM235 billion) in lost revenues.

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

President Sergio Mattarella, who has repeatedly stressed the importance of maintaining a strong, pro-European stance, may also be dismayed at the deal the League and 5-Star come up with.

Other reports by MaliBehiribAe

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