Premier-designate Carlo Cottarelli, center, gets in a car as he leaves his hotel, in Rome, Wednesday, May 30, 2018. Cottarelli has returned to the presidential palace for informal consultations amid continued market turmoil and uncertainty about the prospects of his proposed government. (Angelo Carconi/ANSA via AP)

Italy mulls new government solution to calm market turmoil

May 30, 2018 - 10:39 am

ROME (AP) — Italy's premier-designate said Wednesday that "new possibilities" had emerged to form a government, and that he wanted to give the option a chance given that the prospect of new elections roiled global markets this week.

The two populist parties that got the most votes in the March 4 election, the 5-Star Movement and the League, failed to create a government over the weekend after President Sergio Mattarella vetoed their proposed economy minister.

Mattarella then turned to former IMF official Carlo Cottarelli to form a neutral government of technocrats to lead Italy until early elections. The prospect of a new vote, however, roiled financial markets in Italy, which is Europe's third-largest economy, and around the world. Investors feared a new election would amount to a vote on whether Italy should leave the euro, with uncertain consequences for Europe's economy.

On Wednesday, premier-designate Cottarelli said in a statement that "new possibilities for the birth of a political government had emerged" during his consultations.

"This circumstance, also considering market tensions, has compelled him to wait for further developments," the statement said.

Officials at Mattarella's office said the president agreed with the decision.

Markets relaxed with the news, with the Milan stock exchange rising about 1 percent and government borrowing rates easing.

It wasn't clear what shape a political government might take.

Wednesday afternoon, 5-Star leader Luigi Di Maio met informally with Mattarella, followed by Cottarelli.

League leader Matteo Salvini said he would be willing to revisit the proposed 5-Star-League agreement that had formed the basis of their proposed alliance.

Salvini had earlier stressed that if his proposed cabinet was rejected — including the already vetoed economy minister — it would be better to go to new elections.

Economic analyst Lorenzo Codogno said any new possible political government would likely mean tweaks to the coalition agreement, including dropping euroskeptic Paolo Savona as economy minister.

Mattarella had vetoed Savona, a former industry minister who has questioned whether Italy should keep the euro, leading to the collapse of the 5-Star-League bid.

"The initiative for a new anti-establishment government ... would have to imply a credible pro-European commitment and a commitment to the Italian Constitution, i.e. the fiscal framework, to have any chance of flying," Codogno said.

Di Maio had proposed a renewed effort to form an alliance with the right-wing League on Tuesday night insisting that the two blocs still enjoy a parliamentary majority.

"We're ready to reconsider our position in the sense that if we made a mistake — something I doubt — we'll say so, but now we should respect the will of the people," he said.

Salvini suggested he preferred a neutral government to lead until elections after the summer break.

"I say this with all possible respect: Mattarella explain to us how we can get out of the problem," he said. "The sooner we vote the better."

Salvini has long complained that Mattarella never gave the center-right bloc that brought in the most votes — 37 percent — a mandate to try to form a government. The 5-Stars, by contrast, got 32 percent.

The center-right alliance grouped the League with ex-Premier Silvio Berlusconi's Forza Italia and the smaller right-wing Brothers of Italy. The League had always been a junior partner in Berlusconi's governments over the past two decades, but emerged from the March 4 vote as the leading power in the center-right.

Brothers leader Giorgia Meloni renewed her call that Mattarella give the center-right a mandate to try to form a government that can win a parliamentary majority.

Cottarelli had initially said elections could come after August, but Tuesday's market drop spurred some lawmakers to propose an earlier data, in late July. That would have been previously unthinkable, given it would be hampered by low voter turnout due to Italian summer vacations.

Salvini made clear that a July vote would deprive too many Italians of their right to cast a ballot.

Italians who have already weathered more than 10 weeks of political deadlock seemed resigned to the latest upheavals, criticizing the piqued rhetoric of politicians but acknowledging that the populists were only expressing voter discontent with the EU over immigration and financial policy.

"I am absolutely pro-Europe. Italy was one of the founding nations of Europe," said Riccardo Perrone as he walked through a central Rome vegetable market, a stack of the day's newspapers tucked under his arm. "But certainly Italy has been pushed a bit to the margins."

Cottarelli's statement about renewed chances for a political government was issued after he consulted briefly with Mattarella, having asked for more time to come up with a proposed list of cabinet ministers.

Analyst Codogno said signals the Democratic Party wouldn't vote in favor of a Cottarelli government in mandatory parliamentary confidence votes had dimmed its chances because it would be very short-lived and unable to introduce a mini-budget to help neutralize sales tax hikes. On top of that, any ministers would have to commit not to run in upcoming elections and would have to abandon current jobs, if only for a couple of months.


Barry contributed from Milan.

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