Italy Populists Say Government Talks Entering Final Stretch

(Bloomberg) -- The leader of the anti-migrant League Matteo Salvini said talks with the anti-establishment Five Star Movement on a populist government for Italy have entered their final lap.

“We’re in the final stretch,” Salvini, 45, said in a Facebook video late on Tuesday. “I’m working right until the end to see whether it will be possible.”

Italy Populists Say Government Talks Entering Final Stretch

The parties are still trying to find the right balance between their two policy platforms, Salvini added. Lawmakers from both sides are due to continue negotiations on a policy program Wednesday morning, according to a Five Star official who asked not to be named.

More than ten weeks after Italy’s inconclusive election on March 4, the two politicians are still trying to broker an agreement after repeatedly blowing through deadlines set by President Sergio Mattarella. With the populists threatening to unleash a public spending spree for the indebted nation and demand the European Union rewrites key treaties, markets are starting to react.

The Italian 10-year bond spread jumped by 7 basis points in early trading Wednesday to 138 basis points. That’s the widest since late March.

Italy Populists Say Government Talks Entering Final Stretch

ECB Write-off?

The Italian Huffington Post website, citing what it said was a negotiating draft, reported that the program may include a demand for a 250 billion-euro ($296 billion) debt write-off from the European Central Bank, as well as for procedures to allow member states to ditch the euro and “recover their own monetary sovereignty.” The draft also included a citizens’ income proposal, for a budget of 17 billion euros annually. According to newspaper La Repubblica, the push to soften the stance on the euro came from Five Star.

Five Star’s 31-year-old leader Luigi Di Maio said the draft had changed a great deal “on the debt, the euro and many other parts linked to immigration and our issues,” in remarks cited by newswire Ansa. “Everything has been improved and in any case many of the things which are making news won’t be in there,” he added. Spokesmen for the two parties did not respond to a request for comment on whether the demand for a debt write-off still features.

Di Maio, whose party was beaten by a center-right alliance led by Salvini’s League in the March elections, struck an optimistic tone in his own Facebook video earlier in the day.

Italy Populists Say Government Talks Entering Final Stretch

“The fundamentals are there,” he said. “We’ll have to see if we can manage to put together a contract.” He told reporters after a late evening meeting with Salvini at the lower house of parliament in Rome that a deal could be sealed on Wednesday, according to newswire Ansa.

Prime Minister Wanted

Still, the two leaders haven’t said yet who they’ll nominate as prime minister -- and they say it won’t be announced until they have an agreement on policies. Italian papers reported Wednesday that the two leaders could take turns in serving as premier.

Five Star has pledged to hold an online vote to allow its registered members to have their say on a possible government program. Salvini told his supporters he’ll ask them to endorse any agreement he eventually strikes with Five Star.

“If there’s an agreement we’ll get started, but first I’ll ask you,” he said Tuesday night, addressing the camera. “Otherwise the only way is to ask Italians to go back to elections." A League official said its vote would likely be held in the piazzas of towns throughout Italy next weekend.

Mattarella on Monday gave the two parties yet more time to try to reach an agreement. If they fail, he may revert to an earlier plan to appoint a non-partisan premier, though Five Star and the League have said they’ll use their blocking majority to shoot down any such candidate and trigger new elections.

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