Deadlock in Italy as choice for finance chief is vetoed

Populist parties refuse to back down after president rejects Eurosceptic 81-year-old for cabinet post

ITALY’S political stand-off deepened yesterday with all sides showing no signs of backing down over demands by populist parties to appoint a fiercely Eurosceptic finance minister.

President Sergio Mattarella’s refusal to accept the nomination of 81-year-old Paolo Savona as economy minister has infuriated the leadership of both the Five Star Movement and the League, which received a mandate to form a government last week.

Matteo Salvini, the leader of the antiimmigration League said on Facebook that he was “very angry” at the impasse over the appointment of Mr Savona, who is a distinguished academic and former industry minister whose dismissal of the single currency as a “German cage” has concerned the European Union.

His post was “liked” by Luigi Di Maio, the Five Star leader, with both parties showing no signs of backing down over their demand to appoint Mr Savona, despite turbulence in the financial markets.

Markets were also spooked on Friday in Spain after opposition parties called for a no-confidence motion in the scandal-plagued government of Mariano Rajoy, with the main Spanish index shedding 2.7 per cent on Friday.

The vote to unseat Mr Rajoy appeared to be gaining traction as the centre-Right Ciudadanos party, a partner in the fragile ruling coalition, said yesterday it would be willing to back a neutral candidate to replace the prime minister.

The spread between German and Italian bonds – a key measure of confi- dence – hit its highest level for nearly five years on Friday, and markets will be watching keenly tomorrow when Italy holds a €1.75billion (£1.53billion) bond auction.

Talks on the cabinet continued in Rome yesterday, but Giuseppe Conte, the 53-year-old academic appointed by Five Star and the League as prime minister designate, would say only “we’re working” as he entered the lower house of parliament.

Mr Mattarella’s apparent veto of Mr Savona came after warnings across Europe that Italy’s new anti-establishment government must not destabilise the eurozone with its €100billion-plus spending programme which would smash the EU’s 3 per cent budget deficit ceiling if implemented. Günther Oettinger, the EU’s German budget chief, warned in a German media interview that the EU’s rescue fund was not big enough to bail out an economy the size of Italy, adding that he hoped Five Star and the League would “master a big learning curve”.

Mr Salvini responded furiously to the mounting pressure, Tweeting a selection of German media coverage that he said depicted Italians as “beggars, slackers, tax evaders and scroungers”. He added: “And we should choose an economy minister that suits them? No thanks!”

Five Star was similarly incensed by the blocking of Mr Savona, who has written that joining the euro was an “historic error” for Italy, and argued that the euro has become a vehicle for German domination in Europe.

Failure to agree a cabinet could force a new election as early as next year.