Italy Populists Get Shot at Premiership as Europe Challenged

(Bloomberg) -- Italian President Sergio Mattarella asked Giuseppe Conte, a law professor backed by a populist coalition but with no political experience, to form a government whose policy agenda has already alarmed markets.

Conte, 53, was given a mandate on Wednesday after talks with the head of state, according to Ugo Zampetti, secretary-general at the presidency. Conte has the support of Luigi Di Maio of the anti-establishment Five Star Movement and Matteo Salvini of the anti-immigrant League, who have agreed on a so-called “Contract for a Government of Change.”

"I am aware of the need to confirm Italy’s position in Europe," Conte said after the meeting, accepting his mandate. He added that his government will be based on the accord reached by the euroskeptic Five Star and League.

Born in a hilltop village in the southern Apulia region, Conte is both a professor at Florence University and a practicing lawyer. Di Maio picked Conte, a dapper figure who often sports a folded handkerchief in his breast pocket, for a cabinet minister post even before the March 4 elections that led to an 11-week political stalemate.

A euroskeptic government, to be led by Conte, has unnerved markets even before its birth, with the policy program drawn up by Di Maio and Salvini promising a spending spree and tax cuts in deliberate defiance of European Union fiscal rules.

Euro Area

Italy’s economy is a hurdle for such an administration, with growth set to be the slowest in the euro area this year.

Conte’s lack of political experience and his untested ability to contain personal and political rivalry between Di Maio and Salvini are also a source of concern.

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Italian bonds resumed their slide Wednesday, with the Italian 10-year yield spread over German bunds widening to 189 basis points, the most since June. Outright, the yield on the country’s benchmark rose to 2.4 percent after earlier touching the highest intraday level in almost three years.

Both Di Maio and Salvini confirmed to Mattarella earlier on Wednesday that Conte is their candidate for the post of prime minister, according to a senior state official who asked not to be named discussing confidential talks. Italian media on Tuesday had cast doubt on Conte’s premiership with questions raised over some details on his curriculum vitae.

Major Parties

Conte may meet with leaders of the major political parties on Thursday, senior Five Star Senator Danilo Toninelli told reporters. Conte would seek their support for his government or for specific measures, according to another Five Star official. Five Star and the League have a razor-thin majority in the Senate.

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, possibly next week.

Paolo Savona, an 81-year-old economist and company executive who’s repeatedly called on the government to plan for a possible euro exit, is the Five Star-League choice for the job of finance minister, according to officials from the parties. Di Maio is tipped as a possible minister of labor and economic development, while Salvini could be interior minister.

©2018 Bloomberg L.P.

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