"Italy's League and 5-Star make 'significant steps" towards government deal

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Italian markets fell sharply as investors feared a new election in the wake of an inconclusive March 4 ballot would further benefit the far-right League and anti-establishment 5-Star Movement at the expense of mainstream groups.

Matteo Salvini, the leader of the far-right League, and his M5S counterpart, Luigi Di Maio, said in a joint statement that talks early on Thursday on defining a government programme and setting priorities had been positive.

The elections were a political natural disaster, as they saw populist parties gain more than 50% of votes, while the outgoing government party, the Democratic Party, suffered a historic loss.

After nine weeks of political deadlock after the general elections, President Sergio Mattarella urged Italian parties on Monday to try an form an agreement soon or he would be forced to appoint a temporary "neutral" government and call for new elections as early as July.

In his statement Wednesday, Berlusconi made clear the coalition was intact.

The 5 Star Movement has refused to form a government that implied sharing power with him.

Both Five Star and the League are pressing for an election in July.

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If Italy opts for a caretaker government then this would be formed by policy experts appointed by the president and they would not be able to run in the next election to ensure impartiality.

"It is also just a matter of time until the debate on a possible referendum on the euro starts hitting the headlines again", he said.

The populist rivals are betting that they can break the political impasse by going back to the voters rather than cutting a deal with other parties. "In the meantime lacking an agreement, I hope they will agree via a confidence vote to give birth to a neutral government".

He said that his as yet unnamed government would last until the end of December, after which it would be dissolved and new elections could be held.

FILE PHOTO: League party leader Matteo Salvini (C) speaks next President of Fratelli d'Italia party (Brothers of Italy) Giorgia Meloni (L) and Forza Italia leader Silvio Berlusconi following a talk with Italian President Sergio Mattarella at the Quirinale palace in Rome, Italy, April 12, 2018.

The president added that elections over the summer would be impractical because so many Italians would be on vacation, and risky in autumn because it could jeopardise approval of the annual budget in parliament.

Giancarlo Giorgetti, a politician with the League for more than 20 years who has been mooted as a potential prime minister, was also at the meeting, as was Vincenzo Spadafora, a deputy with M5S. Traditional parties such as Mr Berlusconi's centre-right Forza Italia party and the centre-left Democratic party (PD) suffered heavy losses.

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