Italy's populist government to be sworn in parties and president reach agreement
The leaders of Italy's populist 5 Stars Movement and League parties reached an agreement overnight to break the country's political deadlock and form a new government and gain approval from president Sergio Mattarella.
After Mattarella had previously refused to support their chosen economy minister, leading to potential elections later in the summer, M5S and League leaders Luigi di Maio and Matteo Salvini again put forward academic Giuseppe Conte as prime minister, with another professor, Giovanni Tria, chosen for the role of economy minister.
Professor Savona, who was rejected as economy minister by Mattarella, will be minister for European affairs, while Di Maio will be the labour and economic development minister and Salvini will be minister for the interior. Both Salvini and Di Maio will also be deputy prime ministers while senior League member Giancarlo Giorgetti will be cabinet under-secretary.
Italy's FTSE Mib index leapt up 584.37 points or 2.68% to 22,368.55 in early trading on Friday, while wider European stock markets also reacted well, with Germany's Dax up 0.9% and France's CAC up 1.2%.
Analyst Neil Wilson at Markets.com said Italian 10-year BTP bonds were still elevated, above 2.6% and pushing 2.7%, well north of the 1.7%-1.8% level before the mini crisis blew up.
“So, some calm but certainly the market is still pricing expansionary fiscal policies and/or a run-in with the EU on borrowing and the expectation of ballooning debt-to-GDP. Whatever it is there is still risk in there, but the redenomination/Eurozone breakup risks (the tail risk that wagged the dog this week) have decidedly retreated with the approval of the government,” he added.