ITALY has edged toward its first populist government as the president convened the leaders of the anti-establishment 5-Star Movement and the right-wing League in what could be the final coalition consultation. The summit comes 11 weeks after elections left the country with a hung parliament.

The prospect of a 5-Star/League government weighed heavily on markets and on Italy’s European allies. The cost of borrowing to fund Italy’s persistently high public debt rose to the highest levels in nine months and the Milan stock market was trading down 2%. France’s economics minister has already sounded an alarm that the eurozone’s financial stability could be threatened if a populist government blows Italy’s deficit commitments.

The leader of the 5-Stars, Luigi Di Maio, and League leader Matteo Salvini indicated an agreement on Sunday on a candidate for the new premier to present to President Sergio Mattarella, who must grant his approval and agree on a cabinet list before a parliamentary confidence vote. Salvini said that neither he nor Di Maio would be the premier, an apparent move to keep the fledgling coalition on an even keel.

A 5-Star/League government would have a very thin majority of just over 50% of parliamentary seats.