ROME (Reuters) - Former European Central Bank chief Mario Draghi started talks on Thursday on forming a new Italian government as the largest party in parliament as the 5-Star Movement, softened its initial hostility to his appointment.
The centre-left Democratic Party (PD) gave Draghi its backing but it was still unclear whether he could muster a majority after Matteo Salvini’s right-wing League said it would not support a government backed by 5-Star.
With Italy mired in a health and economic crisis, the head of state gave Draghi a mandate on Wednesday to form an administration after the previous coalition government, which included the anti-establishment 5-Star, collapsed in acrimony.
Outgoing Prime Minister Giuseppe Conte, in his first public comments on the political tumult, wished Draghi well and said he hoped the next government would have a political nature and not comprise only unaffiliated technocrats.
The words of Conte - himself not a member of any party but close to 5-Star - were seen as a signal that his cabinet allies should consider working with Draghi, one of the most respected institutional figures in both Italy and Europe.
Given its large presence in parliament, the 5-Star could play a crucial role in the coming days. Traditionally opposed to technocrat governments, it was instinctively hostile to Draghi when he was first given the nod.
However Luigi Di Maio, the outgoing foreign minister and senior 5-Star politician, urged caution on Thursday.
“In my opinion, the 5-Star Movement has the duty to meet (Draghi), listen and then take a position,” he said. “It is precisely in these circumstances that a political force shows itself to be mature in the eyes of the country.”
Investors cheered Draghi’s sudden arrival on the political scene, hoping that he can spearhead much-delayed reforms to boost growth in a country that has long underperformed its European peers, weighing down the whole euro zone.
Italy’s borrowing costs dropped on Thursday, with the gap between Italian and German bond yields below 100 basis points for the first time since January.
PD leader Nicola Zingaretti said on Thursday Draghi could count on his party’s support, adding that he saw an 80-90% chance that he would manage to form a government.
However, the PD’s Senate leader Andrea Marcucci ruled out the party joining a coalition with the League.
Draghi is not scheduled to speak to 5-Star until Saturday when he will wrap up his consultations and decide whether he has enough backing to form Italy’s 67th government since World War Two.
Draghi is a famously reserved figure and has said nothing in public about the possible make-up of his cabinet.
One option would be to rely on the parties that made up the outgoing coalition, including the 5-Star and the PD, but he is more likely to seek broad cross-party support, given the huge challenges facing Italy.
Former prime minister Silvio Berlusconi suggested his centre-right Forza Italia might be ready to help out - a move that could cause a rift within the right-wing opposition bloc.
Praising the decision to appoint Draghi, Berlusconi said in a statement he had “a high institutional profile around whom we can try to build substantial unity”.
But one of Berlusconi’s allies, the far-right Brothers of Italy, has ruled out backing Draghi. And Salvini, whose League is the largest party on the centre-right, said it would not join a coalition with 5-Star.
Matteo Renzi, the head of the small Italia Viva party which triggered Conte’s downfall by withdrawing from the cabinet, has offered Draghi unconditional support and said on Thursday a new government could take office next week.
Additional reporting by Giuseppe Fonte; Editing by Angus MacSwan and Gareth Jones
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