September 3, 2019 / 8:39 AM / 3 months ago

Italy's 5-Star votes in favor of PD coalition, opening way for government

ROME (Reuters) - Members of Italy’s anti-establishment 5-Star Movement overwhelmingly backed a proposed coalition with the center-left Democratic Party (PD) on Tuesday, opening the way for a new government to take office in the coming days.

FILE PHOTO: 5-Star Movement leader Luigi di Maio speaks to the media after consultations with Italian President Sergio Mattarella in Rome, Italy, August 28, 2019. REUTERS/Ciro de Luca/File Photo

In an online ballot, 79.3% of 5-Star supporters voted in favor of joining forces with the PD, their long-time political adversaries, while 20.7% opposed the alliance, party leader Luigi Di Maio told reporters.

The vote means Prime Minister Giuseppe Conte can now complete work on the new administration and present President Sergio Mattarella with a list of suggested ministers. He is likely to go to the president’s palace to update him on his progress on Wednesday, a political source said.

“I am very proud of today’s vote and very proud of the government that is to come,” Di Maio told reporters after the roughly 80,000 ballots were counted, easily beating 5-Star’s previous record for its frequent online ballots.

“This government will be neither on the left or on the right,” he added. “It will be a government that does the things that need doing.”

The PD’s decision to go into coalition with 5-Star did not require a vote by its rank and file.

Once Mattarella has agreed to Conte’s cabinet, the prime minister will have to win confidence votes in both houses of parliament before the government can officially start work.

The key post of economy minister may go to Dario Scannapieco, a former Treasury official who is vice president of the European Investment Bank, or the PD’s Roberto Gualtieri, now head of the European Parliament’s economic affairs commission, 5-Star and PD sources said.

Another name being considered for the job is former Bank of Italy Deputy Governor Salvatore Rossi, the sources said.

Di Maio, who served as deputy prime minister, industry minister and labor minister in the previous administration of 5-Star and the hard-right League, may become foreign minister in the new government, the sources said.

As 5-Star’s online ballot got under way early in the day, 5-Star and PD unveiled a shared, 26-point policy program for their mooted coalition, putting an expansionary 2020 budget at the top of their agenda.

5-Star, created a decade ago out of opposition to the PD, agreed to form a new administration with its former rival to head off a snap election after its coalition with the League collapsed last month.

Italian benchmark 10-year bond yields hit record lows on Tuesday in a sign that investors believed the new administration would take office, heading off the risk of an early election and prolonged political instability.

“The results (of the 5-Star ballot) are quite strong,” said Chris Scicluna, head of economic research at Daiwa Capital Markets in London. “This is the kind of result that is going to give investors confidence in the new coalition, at least for the next few months, and in its ability to deliver a budget that is likely to be challenging.”

BUDGET FLEXIBILITY

The 5-Star and PD said they would use the coming budget to help the stalled economy grow, but also promised that they would not endanger public finances.

Italy has the second-largest debt burden in the European Union as a proportion of economic output, and the coalition pact called for greater flexibility from Brussels to overcome the “excessive rigidity” of existing budget rules.

Emphasizing social justice, the two parties pledged to introduce a minimum salary, avoid a VAT hike set for January and boost spending on education, research and welfare. The program also called for a web tax on multinationals and the creation of a public bank to help boost development in the poorer south.

FILE PHOTO: Democratic Party leader Nicola Zingaretti waves as he walks into the Presidential Palace for consultations with Italian President Sergio Mattarella in Rome, Italy, August 28, 2019. REUTERS/Remo Casilli/File Photo

5-Star and PD committed to rewriting Italy’s conflict of interest laws, a move that former prime minister Silvio Berlusconi always sought to head off, fearing it could impact negatively on his Mediaset (MS.MI) media empire.

The two parties also promised a “revision” of Italy’s motorway concessions. The vague wording left open the hope for Italy’s Atlantia (ATL.MI) that 5-Star would not press ahead with its demand that it lose its lucrative toll road concession in the wake of last year’s deadly bridge collapse in Genoa.

Additional reporting by Angelo Amante, Giuseppe Fonte and Giselda Vagnoni in Rome and Dhara Ranasinghe in London; Editing by Mark Heinrich

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