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Italian Prime Minister-designate Carlo Cottarelli says that discussions to form an interim government are moving ahead. He was chosen after the failure of populist parties to get their cabinet approved.
Two days after he was asked to try to form a caretaker administration, Italy's prime minister-designate, Carlos Cottarelli, said on Wednesday that "new possibilities for the birth of a political government have emerged."
His statement followed a short meeting with President Sergio Mattarella to discuss his progress, as the country tries to form an interim government following an inconclusive election in March.
Cottarelli added: "This circumstance, also considering market tensions, has compelled me to wait for further developments." His statement gave no further details.
The former IMF economist was tasked with putting together an interim government after the failure of the anti-establishment Five Star Movement (M5S) and anti-immigrant League party to form a coalition.
Finance appointee blocked
The president rejected their nominee for finance minister, 81-year-old Paolo Savona, a euroskeptic economist who has described the euro as "Germany's cage."
That latest twist has forced the two populist parties to the sidelines, as Cottarelli attempts to steer the country towards fresh elections next year.
The parties have vowed to use their parliamentary majority to sabotage any government with Cottarelli at the helm, raising the specter of another national vote as early as July.
M5S leader Luigi di Maio on Wednesday backed away from a call for the president's impeachment, saying instead that voters — and not Germany or the rating agencies — should decide Italy's future.
League leader Matteo Salvini called Cottarelli's appointment "the final blow from those above, who want an enslaved, scared and poor Italy."
No parliamentary support
Any new government will need parliamentary approval — Cottarelli may not even receive support from Italy's traditional mainstream parties. That would be a symbolic defeat for Mattarella, who had hoped to calm financial markets with the appointment of a neutral government.
The political uncertainty rattled European stock markets on Tuesday, and led to a spike in the yield on 10-year Italian government bonds, although the price dropped back on Wednesday.
The euro, as well as US and European stock markets, fell on Tuesday amid fears that political uncertainty in Italy could lead to broader instability in the eurozone.
The Reuters news agency on Wednesday cited three sources as saying that the European Central Bank sees no reason to intervene in the crisis as there are no signs of stress among banks. One source said the ECB does not have the tools or mandate to solve what is a domestic issue.
Italy, the eurozone's third-largest economy, has struggled since the 2007-2009 financial crisis under an enormous debt pile. Investors are worried that euroskeptic parties could form a future government that would abandon the euro, or commit to public spending that would see Italy become the next Greece.
The instability could well boost support for both populist parties in any fresh elections. An IPSOS poll in the Corriere della Sera newspaper on Wednesday showed the League on 25 percent support, compared to around 17 percent in March. Support for M5S was steady at about 32.6 percent.
mm/msh (AFP, AP, dpa, Reuters)