Italy's Fanciful Coalition Draft Draws Investors' Incredulity-For Now

Leroy Wright
May 17, 2018

The League and Five-Star have held six days of talks aimed at putting together a coalition government to end 10 weeks of political stalemate following an inconclusive election on March 4.

According to the draft programme, the parties also aim to use European Union funds to part-fund a so-called citizen income to boost welfare for the poor and unemployed.

The 39-page document, obtained by Huffington Post Italia, also calls for a renegotiation of Italy's European Union budget contributions, an end to sanctions against Russian Federation and plans to dismantle a 2011 pension reform that raised the retirement age.

Other provisions include calling for an end to sanctions against Russian Federation, and the creation of a Conciliation Committee that would sit above the executive with the power to influence government policy.

In a meeting with Mattarella on Monday, 5-Star proposed little-known law professor Giuseppe Conte, but the League has not yet given its go-ahead, a source in the president's office said.

The M5S, meanwhile, said that a draft of the M5S-League government contract, in which Italy's exit from the eurozone is contemplated and which calls for the European Central Bank to write off 250 billion euros in the nation's public debt, is out of date, stressing that the single currency is not in question. The draft document published by Huffington Post Italia was dated May 14.

Borghi called on 5-Star to recognise the need to take on Brussels and got a response from its leader Luigi Di Maio.

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This would cut 10 percentage points off Italy's debt/GDP ratio. Both parties have made clear they intend to fight the EU's Stability Pact.

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

Hours after the document leak, 5-Star and the League issued a further joint statement saying they wanted to "reconsider" the Eurozone's fiscal rules with Italy's partners "in the spirit of returning to the pre-Maastricht set-up" - a reference to the treaty which laid the groundwork for monetary union.

"We need to be able to speak with a single voice, to say to the European Union, to which we pay many billions of euros every year, that for us Italians come first", the League's economics chief Claudio Borghi said, echoing US President Donald Trump's rallying cry "America First".

With Italy now writing the rulebook to its future relationship with the EU, Brussels has been left powerless to push back.

Mr Piccoli described the Commission as "very weak and on its way out".

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