Italian President Sergio Mattarella has given former Prime Minister Giuseppe Conte a mandate to form a new government after a deal to avert fast elections.
The five-star movement against the established order and the center-left Democratic Party (PD), once bitter enemies, agreed to govern in coalition on Wednesday after the collapse of the Italian populist government earlier this month.
It is after Matteo Salvini, leader of the League Party, collapsed the government on migrants earlier this month. He also hoped to cause a rapid general election, polls suggesting that his party will win.
Conte – a gentle former academician who retired as prime minister last week – accepted the mandate on Thursday.
Giuseppe Conte, who resigned last week as Italian Prime Minister, was mandated on Thursday to form a new government after two once bitter rival parties agreed to share power
Conte conditionally accepted the mandate, starting days of negotiations between the Five Star Movement and the Democratic Party to prepare a new government agenda
He will now start discussions with parties to try to form a government and will report to the President on progress.
M5S chief Luigi Di Maio said the deal with the PD must be approved by the members of his party in an online vote that could take place this weekend.
The crisis started on August 8, when the popular extreme right-wing leader Matteo Salvini withdrew his League party with M5S from the government coalition and called for new elections that he thought he would become prime minister.
Mattarella raced to find a solution to the political turmoil, with Italy under a huge mountain of debt and put under pressure to approve a budget in the coming months.
Without a new government, it could be confronted with an automatic increase in value added tax that would hit the poorest families the hardest and could plunge the country into a recession.
"The agreement means that we will not hold elections in the fall and a budget conflict with Brussels later this year may be less fierce than last year," said Craig Erlam, senior market analyst at OANDA.
The power-sharing deal is intended as a snub for League party leader Matteo Salvini, who collapsed the government in the hope of causing an unexpected election whose polls say he will win
Luigi Di Maio, leader of the Five Star Movement, said the new new with the FD should be submitted to party members in an online vote after the conditions have been hammered
& # 39; The two sides still have many differences and it is unlikely that it is a harmonious relationship, but it is likely to be a better match than the previous & # 39 ;, he said.
Investors and markets have welcomed the likely return to political stability in the eurozone's third largest economy, with Italy's 10-year bond yield falling to a record low Wednesday.
But analysts have warned about the deal between the M5S – which had never vowed to unite with traditional parties – and the center-left, which it had long detested, could quickly crumble.
& # 39; Any new government formed by these unlikely companions can be a fairly short-term affair, since the responsibility for a new government is to implement new EU-mandated spending cuts to EUR 23 billion this fall, & # 39; said Michael Hewson, chief market analyst at CMC Markets UK.
& # 39; These are not expected to be popular and are likely to contribute to the populist story of Matteo Salvini, & # 39; he added.
The two sides still need to agree on a shared policy platform and a team of ministers, but 5-star chef Luigi Di Maio and his PD counterpart Nicola Zingaretti said they promised to find common ground for the well-being of the country.
& # 39; We love Italy and we think it's worth trying this experience & # 39 ;, Zingaretti told reporters on Wednesday. Di Maio said shortly afterwards: & # 39; We have made promises to the Italians … and come what we want to do. & # 39;
Salvini said on Wednesday that his party was convinced that next year it would win possible new elections and said: & # 39; we are in no hurry & # 39 ;.
Italian President Sergio Mattarella tries to prevent an election in October when Italy enters into an intensive budget negotiation period (photo, a Corazziere guard in the President's Quirinale Palace in Rome, where negotiations are taking place)
In an early, basic design of a coalition policy platform, the two sides would ask the EU for flexibility on the 2020 budget deficit for & # 39; social cohesion & # 39; in the country, according to financial daily Il Sole 24 Ore Thursday.
The EU imposes budget rules on Member States to ensure financial stability in the block.
It has had a close relationship with Rome under the departing government, with leader Matteo Salvini blaming the EU rules for impoverishing Italians.
The prospect of a new government under the leadership of Conte has created markets, guessing that Italy will get a tax-prudent government that will avoid confronting Europe.
Before Mattarella instructed Conte to form a new board, Italian government bonds had maintained their recent rally until Thursday.
The return on 10-year debt traded at a low that it reached the previous day, and the spread between the Italian and German 10-year debt was 166 basis points, it is the tightest since May 2018.
The FTSE Mib of Milan increased by almost 1.5 percent after the announcement.
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