The euro is sliding amid political uncertainty in Italy

Daniel Fowler
June 1, 2018

The president is due to meet with lawyer Giuseppe Conte - the populist's pick for prime minister - at the presidential palace at 1900 GMT where is widely expected to give him for the second time a mandate to form a government. The accord sees Tria, 69, as finance minister, and euroskeptic economist Paolo Savona, 81, as responsible for European affairs, according to a senior League lawmaker.

In reality the European Central Bank would have limited options, apart from protecting other eurozone members from what would likely be a financial meltdown if Italy were to leave the euro.

"The president of the Republic has the role of a guarantor and never has been, and never can be, subject to any impositions", Mattarella said in a speech after his veto (link in Italian).

His rejection of Savona and nomination of Carlo Cottarelli as caretaker prime minister sparked angry calls for his impeachment as Savona had the backing of the majority of lawmakers.

League leader Matteo Salvini, a fellow Eurosceptic who was Savona's main advocate, said his side's joint plan for a government failed because of pressure from the "powers-that-be, the markets, Berlin, and Paris".

"What the 5-Star Movement and the League want to put in place is maybe a more aggressive, I would say, style in order to force, in order to push the European Commission to pay attention to the Italian requests".

There has been a general calming of financial markets after Tuesday's rout, when investor concerns prompted the biggest one-day rise since 1992 in Italian two-year bond yields and dented the euro's exchange rate.

The euro had shed more than 0.5% to trade at 1.156 versus the dollar at 8:30 a.m. ET.

Cottarelli, 64, was director of the International Monetary Fund's fiscal affairs department from 2008 to 2013 and became known as "Mr Scissors" for his public spending cuts in Italy.

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"In case of failing to win the confidence votes, the government would immediately resign, and its task would be that of routine administration until elections after the month of August", he said. President Sergio Mattarella may soon be forced to dissolve parliament and call snap elections. The center-right coalition, including Lega, got 37 percent, while the Democratic Party won about 20 percent of the vote.

As soon as Conte took his first step on the political stage, it was revealed that he had inflated his CV with false claims of appointments as a researcher at various universities in the USA and Europe.

Di Maio kept his comments to a brief Facebook post thanking supporters and declaring "the government of change is reality".

Investors sold stocks and prices for USA government bonds surged as investors shifted money into lower-risk investments.

Most opinion polls show Salvini's League would see huge gains in any early elections while the 5-Star would remain steady or see some gains.

"They are both led by young and ambitious leaders who share prime-ministerial ambitions".

However, Di Maio said that Mattarella, a former constitutional court judge, had "gone beyond his legal prerogatives".

"Uncertainty and the unknowns themselves affect the real economy", said Levine, of Bank of New York Mellon.

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