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May 18, 2018updated 21 May 2018 9:36am

The Italian Government coalition is coming into focus — and markets don’t like what they see

By Rachel Dobbs

Italy’s populist parties are on the verge of signing a government deal. The leaders of the anti-establish Five Star Movement (M5S) and the far-right League party gave their approval to a joint policy programme.

This follows more than a month of stalemate over whether they would form a coalition government and what it would look like. However, Italians are still waiting for the parties to agree on a prime minister.

Having been approved, the joint programme was published today. Party members of M5S will vote online to show their support or disapproval of the deal throughout today. League members will be polled tomorrow.

If all goes well, the new coalition could take office early next week.

Policy proposals in the programme include:

  • A two-tiered flat tax
  • Universal €780/month per person basic income, partially funded through the EU
  • Repeal of pension reform (which was introduced at the height of the 2011 debt crisis)
  • A rapid deportation of an estimated 500,000 migrants on Italian soil, through the establishment of “temporary stay facilities”.
  • Seeking to relaunch the Italian airline Alitalia
  • Agreement to meet the goals of the Maastricht treaty
  • Scrapping any talk of leaving the euro or demanding that the ECB cancel up to €250 billion in Italian debt.

Speaking about the deal, Luigi Di Maio, the Five Star leader, said:

This government contract binds two political forces that are and remain alternative, to respect and achieve what they promised to citizens.

M5S and League are both Eurosceptic parties, but their outlooks differ strongly on many other issues. It has taken significant wrangling for them to get to this point, but the entente has done little to soothe the markets.

Italian ten-year bonds fell to their weakest level since last October, and equity markets have dipped as investors clamoured to sell Italian stock following the news of the coalition.

Source: Google Finance

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