Italy’s Five Star Movement seeks governing contract with rivals

Italy's anti-establishment Five Star Movement proposed a German-style governing contract with two of its rivals as formal talks aimed at seating a government began on Wednesday, a month after an election ended with a hung parliament.

The inconclusive March 4th vote left President Sergio Mattarella to coax sworn adversaries toward a coalition deal. The process could take weeks and still end in deadlock, which would force yet another vote, prolonging instability in the euro zone's third-largest economy.

In the election, a centre-right alliance taking in the far-right League and four-time prime minister Silvio Berlusconi's Forza Italia won the most seats, followed by the Five Star and then the PD, but no group can govern alone.

Late on Tuesday, Five Star prime ministerial candidate Luigi Di Maio, who commands the biggest single party in parliament, reached out to both to the centre-left Democratic Party (PD) and League leader Matteo Salvini, but with strict conditions.

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Revolution or restoration

So far, the PD – still influenced by its defeated former chief and ex-prime minister Matteo Renzi – has closed the door to any alliance with Five Star, and Mr Salvini has refused to break with the centre-right bloc.

"Salvini has to choose between revolution or restoration. In other words, whether to abandon Berlusconi and start to change Italy, or to cling to Berlusconi and change nothing," Mr Di Maio said late Tuesday on prime-time talk show Di Martedi.

"The PD now must choose whether to follow Renzi's line . . . which is irresponsible," Mr Di Maio said, opening the door instead to the acting PD chief Maurizio Martina and praising some of the ministers in the caretaker PD government.

While Mr Salvini said he would talk to Five Star, he rejected “vetoes or commands”, while Forza Italia’s chamber of deputies leader Mariastella Gelmini said the centre-right should reach out to the PD, not Five Star.

“We won’t play these games,” the PD’s Mr Martina said on Twitter. “Who is seeking to divide the PD won’t succeed.”

Alarming

A Five Star-League coalition would be the most alarming to investors. Five Star has called for a "universal income" for the unemployed while the League is seeking drastic income tax cuts, both of which would balloon Europe's second-largest debt pile as a percentage of output and defy European Union budget rules.

The League also wants wholesale expulsions of migrants and is the only large party that wants Italy to dump the euro, but any deal to govern would exclude abandoning the single currency.

As part of any deal with either party, Mr Di Maio would become prime minister and the partners would draft a list of policies similar to the 177-page document hammered out between German conservatives and Social Democrats to secure Angela Merkel a fourth term as chancellor earlier this year. Those negotiations took months to yield a deal.

Divisions

Mr Mattarella was meeting the speakers of both houses and former president Giorgio Napolitano on Wednesday morning, while in the afternoon small parliamentary groups will file into the hilltop Quirinale presidential palace.

The largest parties are due to meet Mr Mattarella on Thursday. Those in the centre-right alliance will meet with him separately, a sign of the divisions already existing within the bloc, and Mr Berlusconi has indicated he will accompany the Forza Italia delegation. – Reuters