Euro jumps after Italy eurosceptic parties' attempt to form government fails

Euro jumps after Italy eurosceptic parties' attempt to form government fails

Euro jumps after Italy eurosceptic parties' attempt to form government fails

European equities markets rose on Monday, led by the Milan FTSE MIB stock exchange, which jumped almost 2 per cent as investors backed Carlo Cottarelli, an economist formerly with the International Monetary Fund, to form a technocrat government.

However, the Prime Minister designate, Giuseppe Conte, yesterday said he had "returned the mandate" to form a government offered by Mattarella after the President vetoed the appointment of a veteran eurosceptic as economy minister.

The president said that he has done "everything possible" to aid the formation of a government, but that an openly Eurosceptic economy minister ran against the parties' joint programme promise to simply "change Europe for the better from an Italian point of view".

Financial markets tumbled last week on fears the coalition being discussed - a marriage of the far-right League and the populist 5-Star Movement - would unleash a spending splurge and dangerously ramp up Italy's already huge debt, which is equivalent to more than 1.3 times the nation's domestic output.

Risk aversion receded after U.S. President Donald Trump said on Sunday a U.S. team had arrived in North Korea to prepare for a summit between him and North Korean leader Kim Jong Un.

A source from Five Star told Reuters the party could campaign with the League in a fresh vote.

The rare move by the president sparked fury from both parties, who say they will reject Mr Cottarelli's nomination in parliament. "I don't want to talk about impeachment", Salvini said speaking in a radio interview with Radio Capital.

It will not be a political election, but a referendum on preserving democracy ...

The leaders of Five Star and the League, Luigi Di Maio and Matteo Salvini, were infuriated by Mattarella's refusal to accept Savona, a respected financier and economist.

"In the absence of (parliament's) confidence, the government would resign immediately and its main function would be the management of ordinary affairs until elections are held after the month of August", Cottarelli added.

The euro initially rallied against the dollar at the end of a day of drama on Sunday that saw the prospect of a populist government determined to take on Europe recede for now.

However, Salvini dismissed calls on Monday by Five Star and a far-right ally, the Brothers of Italy, to chase Mattarella out of office. Under that clause, parliament can seek to remove a president if a simple majority of lawmakers votes in favour.

Di Maio also called for holding new parliamentary elections after the impeachment of Mattarella.

"We need to keep cool".

Italian journalist Marcello Foa believes that Mattarella's move could be easily defined as illegitimate as "there is no constitutional reason and no constitutional power to block a government that has the majority in parliament". "Some things can not be done in the throes of anger", Salvini said.

While a technocratic government would likely be approved by the centre-left Democratic Party and Forza Italia -the party run by former prime minister Silvio Berlusconi - those two parties alone don't have enough votes.

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