Italy's Chaotic Government Quest Puts Spotlight on the President

(Bloomberg) -- Italian President Sergio Mattarella takes center-stage as he weighs whether to give law professor Giuseppe Conte a chance to lead a populist government following a last-minute wobble over the candidate’s suitability for the post.

Conte, 53, was nominated as prime minister by Luigi Di Maio of the anti-establishment Five Star Movement and Matteo Salvini of the anti-immigrant League. But a flurry of reports in Italian media on Tuesday cast doubt on Conte’s premiership before it even began, with questions raised over his curriculum vitae.

Even as Di Maio and Salvini reaffirmed their support for Conte, Mattarella was in no rush to ask him to form a government. The president is taking extra time to announce his decision, newspaper La Repubblica reported, adding that no candidate is expected to be summoned on Wednesday.

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With markets already stunned by the radical policy platform presented by Five Star and the League, investors -- and European governments -- are looking to Mattarella, 76, a former constitutional court judge, to exercise a calming influence on the incoming government.

Markets are counting on the president to “take up a more assertive and active role in restraining the policies of the incoming populist coalition government,” said Nick Kounis and Aline Schuiling of ABN Amro Bank NV in Amsterdam, citing the drop in government bond yields from the highs of earlier this week.

Mattarella, who appoints both the premier and government ministers, will make his decision amid concern about Conte’s lack of political experience and his ability to contain personal and political rivalry between Di Maio and Salvini. The two leaders have agreed a government program which pledges a spending spree and demands a review of European Union treaties.

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The New York Times earlier questioned Conte’s CV, which says that he stayed from 2008 to 2012, every summer and “for periods of not less than a month, at New York University, to perfect and update his studies.”

The newspaper quoted an NYU spokeswoman as saying Conte’s name did not show up in records as either a student or faculty member, adding it was possible he attended one or two-day programs for which the school does not keep records.

Five Star said in a statement that Conte in his CV “clearly wrote that he perfected and updated his studies at New York University. He never cited lessons or masters degrees attended at that university.”

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Danilo Toninelli, head of Five Star senators, insisted on RAI radio on Wednesday that Conte was still the two parties’ candidate. Conte “has behind him 17 million votes, the Italians who voted for us on March 4, and it’s certainly not invented nonsense about his curriculum which will change things,” Toninelli said.

Mattarella, however, would prefer a Five Star figure as premier, possibly Di Maio, reflecting the fact the party has more seats in parliament, Repubblica reported. He’d rather have a League official as finance minister, possibly senior lawmaker Giancarlo Giorgetti, it said.

Salvini told reporters late on Tuesday that Conte was still the candidate, while reiterating that he was against the idea of Di Maio becoming premier.

Italy’s political uncertainty roiled markets this week, with the 10-year yield spread over German bunds hitting the biggest gap since June. While the spread narrowed to 177 points in Milan at the close on Tuesday, it edged up again to 181 basis points.

Di Maio and Salvini put on a united and determined front after a meeting in Rome on Tuesday. The two held “constructive” talks focusing on “the last details” before Mattarella’s decision, the League said in a statement which made no explicit mention of Conte.

Once Mattarella makes his nomination, the premier-designate will draw up a list of ministers that he has to submit to the head of state. If Mattarella approves the team, the government will be sworn in and then face a vote of confidence in the two houses of parliament.

©2018 Bloomberg L.P.

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