Euro and Italian Stocks Rise as Populist Government Plans Fall Apart

European Union - Italy's Conte fights to form team as ally threatens new vote

Carlo Cottarelli, a former International Monetary Fund director, will face an uphill battle should, as expected, he is tasked with forming a technocrat government for Italy in the midst of a deep political crisis and populist rage at the financial "elite".

The populists said Mattarella gave in to pressures from investors and countries such as Germany when he chose to veto their decision to appoint the euroskeptic economist Paolo Savona as finance minister.

Cottarelli's likely appointment as prime minister has already attracted the wrath of the anti-establishment Five Star Movement and nationalist League, which have denounced a "premeditated" strike from Mattarella and European "lobbies" against their proposed coalition government.

Roth said he doesn't want to discuss the constitutional situation, but "we hope that there will be a stable, pro-European government in Italy without delay".

"Blocking a ministerial choice is beyond (the president's) role", Alessandro Di Battista, a top 5-Star politician, said. 5-Star had waged an independent campaign at inconclusive March 4 elections, while the League campaigned as part of a coalition of right-wing parties.

The prospect of Italy's government going on a spending spree on promised tax cuts and welfare benefits roiled markets last week.

"I agreed to all the ministers except the finance minister", Mattarella told reporters at the presidential palace in Rome.

"I'm not considering the individual, I don't want someone who supports an opinion, which was expressed a few times that would inevitably lead to Italy's exit from the euro", Mattarella said.

Following a general election in early March, the two parties with the most votes-the populist 5Star Movement and far-right League-slowly worked out the terms of a coalition.

Conte's decision to step aside leaves Italy in a political crisis almost three months after March's inconclusive general election.

Italy's premier-designate has told the president he has been unable to form what would have been western Europe's first populist government.

Critics, including Luigi Di Maio, the M5S leader, were quick to criticise Mattarella, accusing him of an abuse of power and calling for his impeachment.

The PM said elections will be held no later than August unless he wins the confidence of parliament.

However, Salvini dismissed calls on Monday by Five Star and a far-right ally, the Brothers of Italy, to chase Mattarella out of office. Both the 5-Stars and the League have signaled they would deprive a Cottarelli government of their votes in Parliament, meaning his would be a caretaker government.

"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. Some things can not be done in the throes of anger.

The vote gave the centre-right alliance of the League, Mr Berlusconi's Forza Italia and a smaller party 37%, while the Five Star Movement took 32%.

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