Markets calmer on signs that Italy may avoid elections

League boss mulls new poll to end Italy stand-off

Italy's president on Monday named a former International Monetary Fund economist as caretaker prime minister to lead the country into new elections, possibly as soon as the autumn, after a political storm whipped up by the collapse of a populist bid for government.

The Five Star and League attempting to form a coalition government, appointing Giuseppe Conte as Prime Minister.

After the president turned to Cottarelli to form a neutral government that would lead Italy until an early election was held, stock markets plunged Tuesday in both Europe's third-largest economy and around the world.

While a technocratic government would likely be approved by the centre-left Democratic Party and Forza Italia - the party run by former prime minister Silvio Berlusconi - those two parties alone don't have enough votes.

Italy has been in political crisis since the weekend when the country's 75-year-old president, Sergio Mattarella, refused to accept the nomination of Paolo Savona, a Eurosceptic, for the role of finance minister.

Mattarella's veto enraged both the 5-Stars' Luigi Di Maio, who threatened to start impeachment proceedings against him, and League leader Salvini, who had essentially issued the president an ultimatum over his economy minister candidate - approve him or the coalition implodes and the turndown becomes campaign fodder to excite voters feeling their political will was foiled.

Mr Conte, who has no political experience, received the mandate last week from the pro-European Mr Mattarella.

"What a awful 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.

Economic analyst Mario La Torre concurred that the official positions staked out by the League and 5-Stars were not all that euroskeptic or different from previous governments that have pressed for a better financial deal for Italy from Brussels.

The IPSOS poll, in the Corriere della Sera newspaper, showed support for the League's would-be coalition partner, the 5-Star Movement, steady at about 32.6 percent - implying a much more comfortable majority if the pair were to try again to govern.

The 5-Star Movement and the right-wing League, the Eurosceptic parties which were thwarted in their bid to give Italy its first populist government, have vowed to give Cottarelli the thumbs down in required confidence votes in Parliament.

If there is a repeat election, it would likely focus on the ideas of Savona who has argued Italy should be ready to quit the euro zone.

Mr Di Maio said: 'There are two paths ahead: either we launch the Conte government with a reasonable solution or we vote right away'.

Di Maio said Wednesday he wants either a government made up of political figures or another election, according to remarks cited by the Ansa newswire, refusing to back Cottarelli's proposed interim administration of technocrats.

No such luck. Mattarella rejected the coalition's choice of Paolo Savona, a controversial Euro-skeptic professor, as minister of the economy. In mid-afternoon trading in Milan, Italy's main equities barometer was down 2.5 per cent.

In each party, 90% of respondents supported the program, and on May 23, President Mattarella invited Conte to form government.

Mattarella said: "Every day, the (bond) spread goes up, it raises our debt" costs.

The uncertainty over Italy's situation has led Moody's to put several Italian banks and companies on negative ratings watch, after already placing Italy's Baa2 rating on review for a possible downgrade over the chaos.

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