Conte returns, but crisis far from over

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August 30, 2019

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Conte returns, but crisis far from over

Source: Agencies | 00:02 UTC+8 August 30, 2019 |

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Italy’s president asked Giuseppe Conte to head up a coalition of the 5-Star Movement and opposition Democratic Party yesterday, that could improve Italy’s fractious relations with the European Union.

Markets welcomed the prospect of a quick end to a three-week political crisis triggered by League leader Matteo Salvini, who pulled his hard-right party out of its governing alliance with 5-Star after weeks of public bickering.

Salvini had wanted fresh polls to capitalize on his party’s success in European elections but his plan backfired as 5-Star and the PD, lagging the League in opinion surveys, set aside their long-standing antipathy to form a government.

Italy’s 10-year borrowing costs fell to an all-time low at auction yesterday on the news as the prospect of a snap election retreated.

Conte, who told reporters that he would present a Cabinet list to the president in the coming days, said his priority was to draft a 2020 budget.

“We must immediately get to work and draw up a budget to avert the VAT (value added tax) hike, protects savers and offers solid prospects for economic growth and social development,” he said.

The VAT will rise from January 1 unless the government can find 23 billion euros (US$26 billion) elsewhere.

The creation of a new government is not yet a done deal, however. The two parties still need to agree to a shared policy platform and divide up Cabinet posts.

In a further complication, 5-Star has promised to put the deal with the PD to an online vote of its members.

Many 5-Star supporters oppose a pact with the center-left and a “yes” vote is not a certainty.

However, investors brushed off those concerns.

Conte was seen as a voice of reason within the previous 5-Star/League coalition.

And investors are betting Italy will get a fiscally prudent government that will avoid confrontation with Europe.

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Conte returns, but crisis far from over

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