The political chaos in Italy is now complete, just one week after the two populist parties (the anti-European Five-Star-Movement and the anti-immigration Lega Nord) had agreed to form a government, and many in Europe are left to wonder how the markets will react to the latest news.
Yesterday evening, Prime Minister Giuseppe Conte proposed his new government to Italian President Sergio Mattarella, who refused to accept his chosen Minister for Economy, Mr Paolo Savona, as he is a well-known Eurosceptic who will do anything possible to get Italy (still Europe’s fourth largest economy) out of the Eurozone.
<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Italian voters will be furious that the establishment is blocking new ministers. Time for more elections and bigger votes. <a href="https://t.co/ECGBqXiyrm">https://t.co/ECGBqXiyrm</a></p>— Nigel Farage (@Nigel_Farage) <a href="https://twitter.com/Nigel_Farage/status/1000817827266400256?ref_src=twsrc%5Etfw">May 27, 2018</a></blockquote>
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Mr Mattarella told Prime Minister Conte that he accepted his government, but needed to replace the economy minister, clearly under pressure from Brussels’ European Commission. Mr Conte duly refused and stated that in this case he no longer desired to be Prime Minister of Italy, leaving the country in utter political chaos.
Related coverage: https://thegoldwater.com/news/26311-Italy-Investors-Flee-As-Populist-Government-Speaks-Of-Euro-Exit
The head of Italy’s Five-Star-Movement, Mr Luigi Di Maio, declared that by overstepping his mandate, President Mattarella had caused nothing short of an ‘institutional crisis’ and that his party would call for an impeachment.
<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Italy's president rejects Savona as economy minister, may mean new election <a href="https://t.co/AI3CikNAhJ">https://t.co/AI3CikNAhJ</a></p>— Reuters Top News (@Reuters) <a href="https://twitter.com/Reuters/status/1000799467648552965?ref_src=twsrc%5Etfw">May 27, 2018</a></blockquote>
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Mr Di Maio: "I want this institutional crisis to be taken to parliament… and the president tried. After tonight, it's truly difficult to believe in the institutions and the laws of the state."
Meanwhile the other winner of the elections, Mr Matteo Salvini of the Lega Nord, called for fresh elections as a way out of the crisis, stating: "In a democracy, if we are still in democracy, there's only one thing to do, let the Italians have their say."
The European Commission and the IMF have meanwhile proposed that Italy should be led by a technocrat government to push through reforms until a solution can be found. Former IMF economist Mr Carlo Cottarelli has been tipped as a potential stop-gap prime minister.
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