Italy's 5Stars and League draft coalition deal leaked

Evarado Alatorre
May 17, 2018

Tensions are therefore likely to be high not just between Italy and Brussels, but also other key European powers like Germany and France, which have traditionally been the twin motors of EU integration.

Italy already has an enormous debt worth more than 130 percent of annual output, second only to Greece in the EU.

At a business forum on the shore of Lake Como in September past year the leaders of Italy's soaring populist parties brushed off suggestions that they wanted to lead their country out of the euro.

In a 16-minute live video to his more than two million followers on Facebook, Salvini revealed that the "government contract" should be finalised on Wednesday, and railed against criticism of the deal in Europe and the media. Now they say they will try and reform the European Union from within.

While Five Star's Di Maio's programme is compared to a child's picture book (above), Italian President Sergio Mattarella is pictured (below) in imagined consultations with potential coalition partners.

"I think that this evening we will close the contract", Di Maio said. Earlier a Five Star official said that the agreement had been sealed.

The shocking report, which outlines demands for the European Union to write off Italian debt amounting to €250 billion (£220 billion), comes as Lega leader Matteo Salvini said Italians will no longer be "slaves" to the EU. The League is also pushing an ambitious overhaul of the justice system.

The 39-page document also pointed to the possibility of establishing a way for countries to leave the euro, a proposal floated by the parties in the past. European Union officials also are nervously following developments of a proposed Italian referendum on the future of the euro currency and policies aimed at turning away refugees from Africa and the Middle East.

Now that such a government is about to take control of Italy, the possibility of the Italian exit from the euro can not be ruled out.

Brussels calls on Italy to stay committed to the 'European path'
Italian markets jolted by 5-Star, League coalition proposals

Ten-year US government Treasury yields, which are a key driver of global borrowing costs, neared a 7-year high of 3.1 percent as more expensive oil pointed to faster inflation and followed some upbeat USA retail sales numbers.

In currency markets, the euro rose 0.1 percent to $1.1822, after having set a five-month low of $1.1763 on Wednesday. And the two parties have repeatedly said they feel no need to respect European commitments in implementing their programme.

Both parties plan to consult supporters over the weekend to see if they back the government pact. "Nobody knows exactly how it will all play out".

The 5-Star Movement has a much greater appeal in the south, where the youth unemployment rate runs higher than 50 percent in many areas.

A leaked draft policy paper on the two parties' plans for government showed discussions about leaving the euro.

The biggest uncertainty remains who will lead the government supposed to put such policies in practice.

This would be the first time the 5-Star Movement has had a government role higher than the municipal level.

Thirty-one-year-old Di Maio has been locked in talks with Matteo Salvini, 45, of the anti-immigrant League since last week. This could therefore rehash the constitutional debate the country had in 2016, when then-Prime Minister Matteo Renzi's planned reforms to usher in greater political stability were voted down in a national referendum. A deal between the two is expected some time this week. "He can still make his voice heard". Failure to form a government now would probably push Italy towards snap elections.

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