5-Star, League want European Central Bank to forgive €250 billion of Italy debt

  • 5-Star, League want European Central Bank to forgive €250 billion of Italy debt

5-Star, League want European Central Bank to forgive €250 billion of Italy debt

"We are seeing the latest, unacceptable interference from an unelected official in Europe", said Salvini.

The two parties held a sixth day of negotiations aimed at creating a government and ending 10 weeks of political stalemate following an inconclusive election on March 4. Leaked drafts of their government "contract" include provision for a "conciliation committee" to settle expected disagreements.

As Italy moves closer to the formation of a government between the anti-establishment 5-Star Movement (M5S) and Lega (League), a leak to Huffington Post of a 40-page policy contract between the two Eurosceptic parties that details their roadmap rattled global markets on Wednesday.

The opposition Democrats have warned that the League's vow to drastically lower taxes to a flat 15-percent rate and the 5-Stars' promise of subsidies to the poor will drastically drive up government borrowing.

Italy has had more than 60 governments in 73 years, so the new mooted coalition government of the 5-Star Movement and the League probably won't last much longer than the others.

Euro zone inflation slowed in April, European statistics agency Eurostat said on Wednesday, confirming an earlier flash estimate and adding to the headache of European Central Bank policy makers seeking to phase out monetary stimulus. The bloc's budget rules require it to cut the debt pile aggressively under the "fiscal compact", which both parties want scrapped.

Some analysts say the market remains complacent about the possibility of a rising dollar, which also notched up a four-month high against the Japanese yen on Thursday as 10-year Treasury yields US10YT=RR approached their highest since 2011.

According to Italian media reports, their nominee for Prime Minister is likely be from a "third party" and will have to be able to make the eurosceptic nature of the new government workable with Brussels.

Sterling gave up earlier gains after the United Kingdom government dismissed a media report that Britain wanted to stay in the European Union's customs union after Brexit. He declined to comment on the outcome of the coalition talks. Both groups have a history of euroscepticism.

Following the news, a leaked manifesto outlining Mr Salvini and Mr Di Maio's plans for forming a government threaten to spark fears of renewed challenges to the European Union after Brexit.

"While the situation in Italy is a concern for currencies, the 5-Star Movement sees Britain struggle with its European Union exit plan and is unlikely to pursue a similar agenda". President Sergio Mattarella, who has repeatedly stressed the importance of maintaining a strong, pro-European stance, may also be dismayed. They also share an anti-establishment sentiment that has taken root in Italy but which has global parallels such as Britain's vote to leave the European Union and the United States election of President Donald Trump.

From the EU's perspective, the coalition of the anti-establishment Five Star Movement (M5S) and the far-right League looks headstrong and unpredictable, possibly even combustible.

Both parties plan to consult supporters over the weekend to see if they back the government pact.