Economy

Italy’s Cottarelli opens door to possible euroskeptic government

Italy’s Cottarelli opens door to possible euroskeptic government

"Experience shows that these "crises" tend to settle down for long periods once the initial adjustment of market expectations has been effected", Carl Weinberg, chief worldwide economist at High Frequency Economics, wrote in a note to clients.

Cottarelli stepped aside on Thursday, telling reporters that "it is no longer necessary to form a technical government". Italy has the heaviest debt load in the eurozone outside Greece, worth 132 percent of annual economic output.

But Italy hasn't solved its problems overnight.

4 March: Inconclusive elections left Italy, the EU's fourth-biggest economy, without a government.

Italy's two main anti-establishment parties could yet form a government, after the man nominated as interim prime minister said politicians, rather than technocrats like himself, might be able to steer the country out of deadlock.

Italy, the eurozone's third biggest economy after Germany and France, has been plunged into crisis with President Sergio Mattarella at the weekend vetoing the nomination of a fierce eurosceptic as economy minister. The Indonesian rupiah led a broader emerging-market currency rally after Bank Indonesia raised the benchmark interest rate for a second time in less than two weeks on Wednesday and flagged more increases to counter a selloff in the nation's currency and bonds.

He was summoned by President Sergio Mattarella to his office on Friday evening. The 5-Star and League have proposed tax cuts and spending plans, like a basic guaranteed income for the poor, that would risk breaching those rules.

That's a huge jump for one day, and brought back bad memories of 2011, when skyrocketing government borrowing costs threatened to break up the euro and helped drive then-Premier Silvio Berlusconi from office.

More news: Facts, Not Children, are What is Missing from Latest Immigration Media Controversy

Savona's euroscepticism was enough for Mattarella to reject his appointment and the coalition unraveled as a result.

"What a awful day for Italy and for democracy", Salvini said in a Facebook post on Sunday, following Mattarella's decision to veto Paolo Savona's nomination for the post of economy minister.

"All the conditions have been met for a M5S-League government", a joint statement from the party leaders said. Five Star leader Luigi Di Maio called on parliament to impeach Mr Mattarella.

Whether or not Five Star and the League can find a suitable candidate for finance minister remains to be seen, but the renewed talks have given stock and bond markets something of a boost.

Global financial markets have been recovering over the past two days after tumbling earlier this week over the prospect of a new Italian election, which has been dominated by debate over the country's future in the eurozone.

Earlier Tuesday, Asian stock markets closed mostly lower, with traders keeping an eye on oil prices, which have tanked since Saudi Arabia and Russian Federation indicated they could raise output after abiding by a self-imposed cap for two years.

Bank of Singapore's head of investment strategy Eli Lee highlighted that with the higher odds of fresh Italian elections, what was previously viewed by the market as mainly Italy-specific risks "now have larger implications on Europe" and "represent much greater stakes".