May 29, 2018 / 5:02 PM / in 6 months

UPDATE 2-German commissioner apologises after EU chides his remarks on Italy

* Oettinger had hinted Italians should shun leading parties

* Fears that anti-elite parties may take Italy out of euro

* EU reassures Italy it respects voters’ right to choose

* (Adds Oettinger apology)

By Alastair Macdonald

BRUSSELS, May 29 (Reuters) - Top European Union officials reassured Italy on Tuesday they would respect the right of its voters to choose a government, and Germany’s European commissioner apologised for suggesting people should not vote for the country’s leading parties.

The uproar highlighted how the possibility of an Italian government run by the anti-establishment League and 5-Star movement has raised new fears that the third-biggest economy in the euro zone would quit the single currency, jeopardising the entire project.

But it also fuelled an anti-Brussels and anti-German reaction in Italy, which could benefit both parties in an election expected within the next few months. 5-Star called for Guenther Oettinger, the German commissioner, to resign.

“My worry, my expectation, is that the coming weeks will show that the markets, government bonds, Italy’s economy, could be so badly hit that these could send a signal to voters not to elect populists from the left or right,” Oettinger had told Deutsche Welle television in an interview.

“This was linked to the possible formation of a government. I can only hope that this plays a role in the election campaign by being a signal not to hand governing responsibilities to the populists,” said Oettinger, who is also the EU’s Budget Commissioner.

Oettinger later apologised for his comments, saying he did not mean to be disrespectful.

At the weekend, Italy’s president rejected 5-Star and the League’s candidate for finance minister who has opposed Italy’s use of the euro. The head of state then named a technocrat premier on Monday to prepare for new elections. Opinion polls put 5-Star and the League in the lead.

The spiralling Italian political crisis provoked a global stock market selloff, caused the euro to fall to an 11-month low and pushed Italy’s short-term borrowing costs to their highest since 2013.

FINANCIAL MARKETS

“Italy’s fate does not lie in the hands of the financial markets. Regardless of which political party may be in power, Italy is a founding member of the European Union that has contributed immensely to European integration,” Jean-Claude Juncker, the head of the EU’s executive Commission and Oettinger’s boss, said in a statement.

“The Commission is ready to work with Italy with responsibility and mutual respect. Italy deserves respect,” he said, adding he was “convinced that Italy will continue on its European path.”

His sentiments were echoed by the European Commissioner for Economic Affairs.

“We must respect the rules and rhythms of democracy,” Pierre Moscovici said. “Italy’s destiny must be decided in Italy, not Brussels, even if we have a common heritage: Europe.

“We must find the right solutions together, through dialogue. I have no doubt Italy will remain at the heart of Europe and the euro area.”

Juncker’s chief spokesman jumped in to call Oettinger’s remarks “unwise”. And Donald Tusk, the chairman of EU leaders’ summits, said, “My appeal to all EU institutions: please respect the voters. We are there to serve them, not to lecture them.”

However, Oettinger was not alone. Other senior EU officials have suggested, in public and private, that the strongest element in curbing new borrowing by parties who promise higher spending and lower taxes is pressure from investors, who fear Italy could over-extend its public finances.

Oettinger, 64, a former premier of the wealthy southwestern German state of Baden-Wuerttemberg, is from Chancellor Angela Merkel’s Christian Democrats. He has a record of plain speaking, and of gaffes. Juncker has reprimanded him in the past over attempts at humour that involved slights on gays and the Chinese.

Italy’s central bank warned on Tuesday the nation was only “a few short steps” away from losing investors’ confidence, as financial markets suffered the biggest sell-off in years on fears that new elections would become a proxy vote on euro membership.

Sources told Reuters that Italy could go back to polls as soon as July 29. Italy’s economy faces high public debt, low productivity and slow growth, which makes investors concerned about the country’s ability to repay what it owes. (Additional reporting by Gabriela Baczynska Editing by Mark Heinrich)

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