Italy's populists aim to challenge European Union on debt and migrants

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"From Europe we have the umpteenth unacceptable interference (...); now is the time for legality, security and push-backs", Salvini said.

The M5S, meanwhile, said that a draft of the M5S-League government contract, in which Italy's exit from the eurozone is contemplated and which calls for the European Central Bank to write off 250 billion euros in the nation's public debt, is out of date, stressing that the single currency is not in question.

On Wednesday morning Salvini said that negotiations were nearing conclusion, while Di Maio confirmed the two parties could wrap up the "contract of government" within the day.

Only five percent of Italian government bonds are held by non-EU residents, making the chances of a massive flight of capital unlikely, ADM Investor Services market strategist Marc Ostwald said.

The European Union is meddling in Italy's domestic politics, according to League leader Matteo Salvini.

Once fiercely Eurosceptic, the 5-Star has softened its stance in recent months, looking to reassure financial investors that it is fiscally responsible.

This will now be something to watch as populism is back on the agenda for markets where the coalition has radical ideas to free up billions of euros for tax cuts and welfare.

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They have both vowed to scrap an unpopular pension reform - a move that would punch a 15-billion-euro hole in state coffers.

Earlier, the leaders of the anti-immigrant League party and the anti-establishment Five Star movement agreed to meet the Italian President to share details of a government programme for the eurozone's third largest economy, thrashed out over the weekend. "This is the moment to have the courage to go all the way".

In Brussels, European Commission President Jean-Claude Juncker said the EU would not be complete without Italy, when asked at a news conference about Italy's role in the EU and its reliability in respecting common rules. Salvini said Wednesday that the talks were going well.

The League has promised a tougher line on migrants arriving from Africa and denounced Avramopoulos's comments.

Di Maio backed his potential coalition partner, saying the nascent government was "receiving constant attacks, even today by some eurocrats who weren't elected by anyone".

They are still discussing how they want to tighten immigration which they denounce in the leaked draft as "unsustainable for Italy". The policy program will probably be published Thursday, 5-Star said.

In a meeting with Mattarella on Monday, 5-Star proposed little-known law professor Giuseppe Conte, but the League has not yet given its go-ahead, a source in the president's office said. If they fail to do so, fresh elections look inevitable.

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