Radical coalition talks point to Italy's euro exit

Radical coalition talks point to Italy's euro exit

Radical coalition talks point to Italy's euro exit

However after negotiations had looked promising ahead of a deadline on Monday, they were extended when League leader Matteo Salvini laid down conditions on the "key issues" of immigration and policy regarding the European Union.

Luigi Di Maio, leader of the Five Star Movement, said his party's call for a referendum on Italy's membership of the single currency was a "last resort" to force a relaxation of European Union fiscal rules.

The League and 5-Star have held a week of talks aimed at putting together a coalition government and ending more than 10 weeks of political stalemate following an inconclusive election on March 4.

"We have asked the President of the Republic for more time to finish the government contract". Five Star became the single biggest party.

A leaked draft of the coalition programme revealed the eurosceptic team will demand a renegotiation of Italy's European Union budget contributions, the dismantling of a 2011 pension reform that raised the retirement age, and an end to sanctions against Russian Federation.

"First must come the things that need doing, and only afterwards (we need worry about) absurd rules written many years ago when the world was totally different", he said.

While Five Star's Di Maio's programme is compared to a child's picture book (above), Italian President Sergio Mattarella is pictured (below) in imagined consultations with potential coalition partners. Di Maio, 31, said earlier this week that tax evaders would be jailed.

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

The opposition Democrats have warned that the League's vow to drastically lower taxes to a flat 15-percent rate and the 5-Stars' promise of subsidies to the poor will drastically drive up government borrowing. Di Maio has pledged to guarantee a minimum income to the unemployed.

"Now is the time for legality, security and push-backs", said the League's leader, who has called for changes in European Union treaties. "We can not go to Brussels with positions that are far apart", he said. Italy's huge public debt is mainly domestically owned making both issues highly sensitive for Rome.

"It's very clear that in current times of economic growth Italy needs to put its debt on a downwards trajectory", he said. Italians are sick of the austerity associated with euro membership, and "will not tolerate" another round of it.

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

Di Maio shrugged off such warnings as the protests of "Eurocrats that nobody elected".

They are now using less strident tones, and a 5-Star official said on Friday any plans to raise the budget deficit will first be discussed with Brussels in a "courteous" way.

The FTSE MIB benchmark stock index was down 2.3 per cent, underperforming the Stoxx Europe 600 index that was up 0.2 per cent. Italy's 10-year government bond yield climbed to 2.12 per cent, up 17 basis points on the day, the biggest upward move for more than two years.

After Berlusconi refused to have anything to do with the 5-Star Movement, who he regards as "more risky than communists", Salvini and Di Maio set out to negotiate an agreement to join forces in government.

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