Italy’s president gives Conte green light to form new government

Italy's president gives Conte green light to form new government

Italy’s president asked Giuseppe Conte to head up a coalition of the 5-Star Movement and opposition Democratic Party (PD) on Thursday, a move could 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 capitalise 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 on Thursday on the news as the prospect of a snap election retreated.

Conte, who told reporters 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 hike, protects savers and offers solid prospects for economic growth and social development,” he said.

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

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