Italy Left Waiting for a Premier as Populists' Talks Drag On

Italy Left Waiting for a Premier as Populists' Talks Drag On

Italy Left Waiting for a Premier as Populists' Talks Drag On

"We are seeing the latest, unacceptable interference from an unelected official in Europe", said Salvini.

Italy inched closer towards ending more than two months of political deadlock on Thursday as anti-establishment leader Luigi Di Maio said he was confident an agreement would be reached on forming a coalition government with the far-right. Di Maio and Salvini are expected to report back to him with their plans. The leaked draft also proposed asking the European Central Bank to "freeze" or "cancel" €250bn in Italian debt that it holds after the end of its quantitative easing bond-buying programme - another highly contentious proposal that could unnerve markets and policymakers.

The League has pledged to introduce a flat tax rate of 15 percent, which would lower tax revenues by some 80 billion euros ($95 billion) per year, according to some estimates, while 5-Star has pledged new welfare payments for the poor costed at 17 billion euros.

A draft of the accord reviewed by Reuters earlier on Thursday spelt out a spending plan that would breach European Union rules on fiscal discipline: cutting taxes, increasing welfare payments for the poor and scrapping an unpopular pension reform.

As Italy's sovereign debt has reached 130% debt-to-GDP ratio, the incoming the anti-establishment parties are set on introducing a universal basic income of €780/month at an estimated annual cost of €17 billion and trimming the overall tax burden by slashing VAT and introducing a flat corporate tax, while all the while calling for European Union matching funds. Italy's main share index closed up 0.3 percent and the gap between the yields on Italy's benchmark bonds and safer German bonds retreated after briefly widening on Thursday to their widest since early January.

The Commission, with just a year of its term remaining, "can't really do much other than put Italy's finances under greater scrutiny, and markets don't care about that", he said. The bloc's budget rules require it to cut the debt pile aggressively under the "fiscal compact", which both parties want scrapped. The bigger the spread, the lower investor confidence and the higher the interest rates the country has to pay to borrow money.

Blunt-talking Matteo Salvini, who heads the right-wing anti-migrant League party, indicated he'd prefer to go to a new election, 10 weeks after a vote yielded political gridlock, if his forces don't get a "free hand to manage the security of Italians". "The government is not [yet] formed, we have to wait and see". 5-Star has moderated its position considerably in the past year, rowing back on a previous plan to hold a referendum on Italy's membership of the currency bloc.

It could lead to a spate of Eurosceptic, populist parties making promises to clear European Union debt. However, the League still wants to leave the eurozone as soon as politically feasible.

The comments are taking a page out of U.S. President Donald Trump's book and rallying cry "America First".

The United States and China start trade talks on Thursday meant to avert a damaging tariff war, with the White House's harshest China critic relegated to a supporting role, senior Trump administration officials said on Wednesday. It might also dismay Italian President Sergio Mattarella, who has repeatedly stressed the importance of maintaining a strong, pro-European stance.

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