Italy's Premier Plans Ultimatum to Quarreling Coalition Partners

(Bloomberg) -- Prime Minister Giuseppe Conte is preparing an “ultimatum” to his two quarreling deputy premiers, as the newly strengthened League party ramps up the pressure for action on its terms, or a snap vote.

Conte has grown frustrated with the war of words between the deputies who call the shots in the populist coalition -- Matteo Salvini of the League and Luigi Di Maio of the Five Star Movement -- and he plans to say Monday that while he’s willing to stay on, he won’t continue in a government “at death’s door,” daily la Repubblica reported.

With Italy awaiting a response from the European Union on its recent clarifications about its public finances, Conte plans to say at a 6:15 p.m. Monday news conference in Rome that he needs room for negotiating with Brussels, Repubblica said. A spokesman for Conte didn’t respond to a request for comment on the “ultimatum” plan.

Sworn in a year ago, the government has been buffeted by rising tensions between Salvini and Di Maio. Salvini, energized by the rightist League soaring to become Italy’s top political force after European parliamentary elections May 26, told party lawmakers last week he wants to keep the coalition going, but is ready to see it collapse if he can’t push through key policies like his flat-tax plan.

Stalled Administration

Italy’s 10-year bond yield fell 7.5 basis points to 2.60%, tightening the spread to similar-maturity German debt by 6 points to 280.5 basis points.

“I hope Conte will perform a miracle,” the League’s Gian Marco Centinaio, agriculture minister, told Radio Capital on Monday. The League “has the willingness to work together, but if no agreement is reached, I don’t see any alternative to elections.”

Centinaio also said the League aims to push a flat tax through in the 2020 budget this fall, even if that risks a clash with Brussels. “There are other countries which were in our condition and blew up the deficit,” Centinaio said. “If others do it, why can’t we?”

In his remarks Monday, Conte will rule out using deficit spending to fund the flat tax, Repubblica said. That attempt to seize control of the policy debate and take the lead in negotiations with the EU could put a damper on Salvini’s plan to fast-track the flat tax and other measures, following the League’s victory in the European elections.

Conte, Salvini and Di Maio have yet to convene their first cabinet meeting since the European vote. Salvini has stayed in election mode, spending most of his time on the campaign trail ahead of a run-off ballot in mayoral elections due on Sunday in towns across Italy. The first round was held on the same day as the European vote.

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