League to Sit Down With Five Star in Italy Government Talks

(Bloomberg) -- League leader Matteo Salvini said he would start talks with Luigi Di Maio of the anti-establishment Five Star Movement and other party leaders on forming Italy’s next government, with pension reform, tax cuts and curbs on immigration as his priorities.

“We need to sit at the table with everyone, and certainly also with Five Star,” Salvini told newspaper Il Messaggero in an interview published on Monday. He said those talks must decide how to scrap a pension reform that raised the retirement age, “how to reduce taxes and how to control immigration.”

Salvini, whose party leads a center-right alliance, and Di Maio have emerged as the lead negotiators in the search for a premier capable of winning a parliamentary majority, after reaching an accord on speakers for the lower house and the Senate. Both the center-right and Five Star fell short of such a majority in the March 4 general elections.

Salvini claimed the premiership for the center-right, but did not insist that he should get the job himself. “I’m certainly ready to be premier, but the program comes first. The name of who leads the government is the last thing,” he said.

Populist Duo

With President Sergio Mattarella expected to start talks with party leaders on April 3, a pact by Salvini and Di Maio for the elections of parliamentary speakers has raised the prospect of the populist duo ruling together. Hurdles to such an accord include who should be premier, policy differences and tensions within both the center-right and Five Star.

Investors worry League-Five Star spending policies and challenges to European Union budget rules could weigh on the feeble recovery and undermine the euro area. Italian bond yields fell near this year’s lows last week, as investors bet that establishment parties could temper a populist agenda.

Ex-premier Silvio Berlusconi, who is reluctant for the center-right to seal a deal with Five Star, said in an interview with newspaper Corriere della Sera that Salvini “knows full well that the center-right doesn’t win without a strong moderate component.”

Berlusconi said the League’s chances of governing depend on center-right unity. He ruled out Salvini breaking away from their alliance to form a government with Di Maio. “That would be a Hircocervus” -- a mythological half-goat, half-stag creature -- because of “opposed and irreconcilable characters,” Berlusconi said.

Flat Tax

Five Star has its base in the depressed south of Italy and wants a universal basic income, while the League is rooted in the rich, industrial north of Italy and is pushing for a flat tax. Salvini said the flat tax is “well-prepared,” while he had heard “two or three different versions” on the guaranteed income.

Salvini has pledged that he would only join up with Five Star with the blessing of Berlusconi, who is pushing for a tie-up with the center-left Democratic Party. But the latter, in disarray after its worst-ever electoral result, has promised to go into opposition.

Both Di Maio and Beppe Grillo, co-founder of Five Star, have praised Salvini since their two parties sidelined establishment parties to agree on parliamentary speakers. “Salvini is someone who when he says something, he sticks to it, and that’s rare,” said Grillo.

--With assistance from Marco Bertacche

To contact the reporter on this story: John Follain in Rome at jfollain2@bloomberg.net.

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Alessandra Migliaccio, Patrick Henry

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