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Europe Wary of Italy Government Moves  05/21 06:11

   ROME (AP) -- Italy edged toward its first populist government Monday as the 
president convened the leaders of the anti-establishment 5-Star Movement and 
the right-wing League in what could be a final consultations, 11 weeks after 
elections left the country with a hung parliament.

   The prospect of a 5-Star-League government weighed heavily on markets and on 
Italy's European allies. The cost of borrowing to fund Italy's persistently 
high public debt rose to the highest levels in nine months and the Milan stock 
market was trading down 2 percent.

   France's economics minister has already sounded an alarm that the eurozone's 
financial stability could be threatened if a populist government blows Italy's 
deficit commitments.

   "If the new government takes the risk of not respecting its commitments on 
debt, the deficit, but also on consolidation of banks, then the entire 
financial stability of the eurozone will be threatened,"  Bruno Le Maire told 
the Cnews television channel Sunday.

   The leader of the 5-Stars, Luigi Di Maio, and League leader Matteo Salvini 
indicated agreement Sunday on a candidate for premier to present to President 
Sergio Mattarella, who must grant his approval and agree on a Cabinet list 
before a parliamentary confidence vote.

   Salvini said that neither he nor Di Maio would be the premier, an apparent 
move to keep the fledgling coalition on an even keel.

   Most worrying to financial markets is the two parties' platform, unveiled 
last week. It includes a rollback on pension reform, a minimum salary for 
struggling Italians and the introduction of a flat tax, which will contribute 
to a large fiscal expansion that economists and EU policymakers worry will 
increase the country's debt burden.

   The program also introduces a tougher stance on deporting migrants and calls 
for a better dialogue with Russia on economic and foreign policy matters while 
maintaining its trans-Atlantic alliance.

   Di Maio assured his voters that the government would find the money to pay 
for social programs and tax cuts both through investments and in upcoming 
negotiations in Brussels on the European Union's seven-year budget cycle, but 
neither the markets nor European partners have been assuaged.

   A 5-Star-League government would have a very thin majority of just over 50 
percent of parliamentary seats. Salvini ran in the elections as part of a 
right-wing coalition including Silvio Berlusconi's Forza Italia, but Berlusconi 
opposes the 5-Stars and says he will not support them in a confidence vote.


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