Italy’s Prime Minister-designate Giuseppe Conte labored to finalize his cabinet team on Friday as markets tumbled on fears the incoming eurosceptic government will embark on a spending spree that will undermine fragile state finances.
The eurozone’s leading financial risk indicator, the gap between Italian and German sovereign debt yields, surged to 215 basis points, its widest for four years, while Italy’s bank stock index hit an 11-month low.
With investor concern growing, Conte, a political novice with no managerial or administrative experience, met Bank of Italy governor Ignazio Visco, then held talks with his political backers to try to sign off on a list of ministers.
The meeting broke up without agreement, political sources said, with much attention still focused on the key role of economy minister.
Coalition partners the far-right League and anti-establishment 5-Star Movement are eager to give the job to 81-year-old economist Paolo Savona, who has questioned Italy’s membership of the euro.
However, President Sergio Mattarella has made clear he is unhappy with the choice and has the power of veto. A political source said League leader Matteo was refusing to back down.
“Nobody should have fear of change,” Salvini said in a brief statement, adding that he was working on a government that would make Italy “a protagonist in Europe and in the world”.
A source close to 5-Star said it was doubtful Conte would be able to present his ministerial team on Friday. Mattarella earlier cancelled his engagements on Friday afternoon raising speculation that a deal had been reached.
There was no apparent link between the fall in the markets and the delay in forming a cabinet.
Source : CNBC