Italian PM quits four day after being asked to form government

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Carlo Cottarelli, a former International Monetary Fund official, was tapped as premier of a non-political government of technocrats after an attempt by two populist parties to form a government foundered.

If that is the case, Mr Cottarelli has said his government would resign immediately before managing day-to-day affairs until new elections after August.

Italy's Prime Minister-designate Giuseppe Conte gave up on efforts to form a government on Sunday after the president apparently rejected his pick for the economy ministry, increasing the likelihood of another election this year.

Italian President Sergio Mattarella received prime minister-designate Giuseppe Conte in a meeting that aimed to resolve a days-long standoff over the composition of Italy's next cabinet or lead to the appointment of a caretaker government.

Mattarella's decision sparked an unprecedented institutional crisis, with strong opposition being mounted by the 5 Star Movement and the League, which garnered more than 50 per cent of the votes in the March 4 national elections.

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".

The two anti-establishment parties, the 5-Star Movement and League, which had abandoned plans to jointly take power at the weekend after the president blocked their proposed cabinet lineup are now trying to find a compromise, a source said.

Emerging market stocks lost 1.2 percent, marking a new low point for the year, under continued pressure from a rising USA dollar for countries that often borrow in that currency.

Of Savona, Salvini said: "we've found a person who, if he wishes, could be with us" in a future government.

That could raise the stakes for the next election by making it more clearly about whether Italy should reconsider its membership in the euro.

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.

Currently, Mr Cottarelli has no major parliamentary support for a stopgap government of technocrats.

The centre-right Forza Italia party also said it would not vote for a possible Cottarelli government.

His comments have created a significant amount of anger inside the EU's leadership circle but has also infuriated Italian politicians. The M5S and the League favour big spending increases and tax cuts aimed at reviving Italy's sluggish economy, despite its public debt (132% of GDP at the end of 2017).

If a coalition can not be formed, the country will again hold elections, with the president having to dissolve parliament and host a vote as early as July 29, if most of the major parties have their way. That would have been previously unthinkable, given it would be hampered by low voter turnout due to Italian summer vacations. "If we want to discuss it, then we should do so in a serious fashion".

He will struggle to gain the approval of parliament with Five Star and the League commanding a majority in both houses.

However, Di Maio said that Mattarella had "gone beyond his legal prerogatives" and said that with the backing of the League it would be "almost a certainty" that Mattarella faces an impeachment trial. It would be a disaster for the union at a time when Britain has voted to leave it.

Some analysts said that they were sceptical of the possibility of Italy leaving the euro, a fear that contributed to the Italian 2-year yield recording its biggest one-day rise since 1992 on Tuesday.

"We will ask parliament to charge Mattarella with high treason because he has acted under foreign pressure", Brothers of Italy chief Giorgia Meloni said on La7 television channel.