ITALY appears destined for early elections after after populist parties failed to convince the president that their cabinet picks would not destroy international investors’ faith in the country.
A former International Monetary Fund official and specialist in budget-slashing, Carlo Cottarelli, has accepted president Sergio Mattarella’s request to form a government “that will bring the country to new elections”.
Inconclusive March 4 elections had created what has proved to be an intractable political impasse.
Traders have reacted uneasily, with bond markets suggesting investors are becoming more cautious about lending to Italy.
Cottarelli expressed hope his appointment could calm the markets. “In the last few days, tensions have increased in the financial markets,” the premier-designate said.
“In any case, the Italian economy is growing, and the public accounts remain under control. A government led by me would assure prudent management of our public accounts.”
However, with the prospect of anti-euro political sentiment suddenly increasing, and another election approaching, markets remained on edge as of yesterday.
The government’s benchmark borrowing rate increased further, a sign of caution, even after Cottarelli was appointed.
The 10-year rate hit 2.6% on Monday, up sharply from 1.7% last month. That is still manageable for the government, however, and well below the 7% that forced a change of government in 2011.
Weeks ago, an exasperated Mattarella had told the nation that if Italy’s squabbling parties failed to join forces for Italians’ common good and forge a viable coalition, he would tap a technocrat, an expert not directly affiliated to political parties, to take the country to elections by year’s end.
Mattarella was true to his word after refusing to approve an economy minister proposed by the populists who has raised the spectre of Italy eventually ditching the euro.
The Five Star Movement and the League, the parties who 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.
A government led by Cottarelli “is born dead”, said Five Star proponent Manlio Di Stefano.
“It makes no sense to speak about it in a serious way.”
In his brief remarks, Cottarelli made plain he knew a government of fellow technocrats might not be approved by parliament.
“In case of failing to win the confidence votes, the government would immediately resign, and its task would be that of routine administration until elections after the month of August,” he said.
Cottarelli said that should his proposed cabinet be confirmed in parliament, he would set to work to ensure the country’s official budget is approved by lawmakers.
The budget law must be approved by December. After that, Mattarella would dissolve parliament and set elections for 2019, Cottarelli said.
Mattarella’s veto enraged both League leader Matteo Salvini and the Five Star Movement’s Luigi Di Maio, who threatened impeachment proceedings against him.
Mattarella said he had vetoed Salvini’s economy minister candidate to spare Italian investors, businesses and families seeing more of their resources “burned” up by nervous markets losing faith in Italy’s willingness to back the euro and the EU.
In an interview with Radio Capital on Monday, Salvini wondered aloud who would vote for Cottarelli.
Mattarella “didn’t give the centre-right the chance to form a government because we didn’t have the votes, and now Mr Cottarelli arrives without any votes? It seems a stretch,” Salvini said.
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