Political novice Giuseppe Conte proposed as Italy’s PM

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Italian bonds and equities under pressure as investors take fright

 

Italy’s anti-establishment Five Star Movement and the far-right League have proposed Giuseppe Conte, a civil lawyer and academic, as the country’s new prime minister to lead their populist government.

Luigi Di Maio, Five Star leader, and Matteo Salvini, the League leader, told Sergio Mattarella, Italy’s president, in separate meetings at the Quirinal Palace on Monday that they had chosen Mr Conte as their compromise candidate for prime minister.

Mr Mattarella, however, did not immediately hand a mandate to Mr Conte, instead summoning the two speakers of parliament to the president’s palace on Tuesday for further talks, suggesting he may harbour some doubts about the selection.

Mr Di Maio confirmed that they had nominated Mr Conte, a 53-year-old little-known professor, after meeting Mr Mattarella, and dismissed concerns that he would be a powerless technocrat.

“Giuseppe Conte will be a political prime minister of a political government, chosen by two political forces that include political figures within it. And especially with the support of two political forces that were voted,” Mr Di Maio said.

Later, Mr Salvini added: “We are ready — our team and our project for the country are clear . . . no one has anything to fear.” After sealing a deal on a joint platform to run the country, replete with measures that have unsettled EU policymakers and investors in Italian securities, Mr Di Maio and Mr Salvini spent the weekend trying to find a compromise choice to implement their plan.

As the two populist parties neared agreement on running the eurozone’s third-largest economy, investors continued their flight from Italian assets, with Italian sovereign bonds selling off sharply. The 10-year bond yield rose 20 basis points to 2.42 per cent, taking its total rise in the past two weeks to 64bp.

The premium over equivalent German debt, a widely watched indicator of eurozone political stress, hit 189bp, its highest level since last June. Mr Di Maio, who led Five Star to win 33 per cent of the vote in Italy’s general election in March, had long held out hope that he would become prime minister, but had always been blocked by Mr Salvini.

But Mr Di Maio is still expected to be part of the government, as minister of labour and economic development, allowing him to oversee the disbursement of a €780-per-person basic income to the poor, which is Five Star’s signature policy.

Meanwhile, Mr Salvini is set to become interior minister, which would put him in charge of a crackdown on immigration, including plans to deport up to 500,000 illegal immigrants, which was central to his campaign.

Giampiero Massolo, chairman of Fincantieri, the state-owned shipbuilding company, and a veteran diplomat, is expected to be foreign minister in the new government, while the post of finance minister is still very much up for discussion, with Giancarlo Giorgetti, a key aide to Mr Salvini, seen to be in pole position.

Mr Mattarella’s reticence on Monday evening looked set to stall the appointments and the replacement of the incumbent centre-left administration led by Paolo Gentiloni. The establishment of a populist government in Rome has already raised alarm bells across EU capitals.

Bruno Le Maire, the French finance minister, issued a blunt warning to Rome on Sunday, saying that Italy needed to respect EU budget rules or the single currency would be in jeopardy.

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