May 11, 2018 / 2:26 PM / 15 days ago

Wanted: Italian prime minister, as 5-Star and League negotiate

ROME (Reuters) - Italy’s two anti-establishment parties, the 5-Star Movement and the far-right League, are drafting a program for a new government in the hope of ending almost 10 weeks of political stalemate, but are still seeking someone to lead it.

FILE PHOTO: League party leader Matteo Salvini (C) speaks next President of Fratelli d'Italia party (Brothers of Italy) Giorgia Meloni (L) and Forza Italia leader Silvio Berlusconi following a talk with Italian President Sergio Mattarella at the Quirinale palace in Rome, Italy, April 12, 2018. REUTERS/Max Rossi/File Photo

To address concerns that their pledges to raise welfare spending and cut taxes will undermine the economic stability of the heavily indebted country, 5-Star leader Luigi Di Maio said the administration would not be a threat to Europe.

Di Maio met with League leader Matteo Salvini for a second consecutive day, and afterward they signaled there had been progress on policy, but still offered no names for the top job.

Asked about the premiership, Salvini told reporters: “When we have something to say, we’ll say it.”

The two party leaders will meet again in Milan on Saturday, and a 5-Star source said the aim was to offer a candidate to President Sergio Mattarella on Sunday.

Vincenzo Spadafora, a close aide to Di Maio, said the two parties were looking for someone outside both parties who “has a high profile and is trusted by Italian citizens and Italy’s international partners”.

Di Maio insisted after the March 4 election that he should be the next prime minister, but dropped this demand last week to help clinch a deal with the League.

5-Star won 32 percent of the vote, making it the largest party in parliament, while the League got 17 percent to become the second-largest. Salvini said weeks ago he would not insist on leading any government his group was a part of.

“RATIONAL AND REASONABLE”

The parties said meetings to agree a program to cut taxes, hike welfare payments and bolster efforts to stop irregular immigration had made progress.

FILE PHOTO: Anti-establishment 5-Star Movement leader Luigi Di Maio speaks following a talk with Italian President Sergio Mattarella at the Quirinal Palace in Rome, Italy, April 12, 2018. REUTERS/Max Rossi/File Photo

On Thursday, news that they were seeking to form a government pushed the gap between Italian benchmark bond yields and the safer German equivalent to its widest in seven weeks on concerns that the state accounts might take a hit.

“It’s being called a populist government. Some have said it’s a threat to the people,” Di Maio told reporters after meeting Salvini. “Some say it’s a threat to Europe ... but it’s not Europe that’s under threat.”

The Italian-German bond spread narrowed on Friday, returning to where it was before 5-Star and the League began negotiations.

Though both parties have said they want to renegotiate the EU’s fiscal rules to allow Italy to spend more, a 5-Star source said that any plans to increase the budget deficit would be discussed with Brussels first.

“The government will be rational and reasonable (with the public accounts),” the source said.

5-Star’s flagship policy is universal income support for the poor, while the League’s main campaign promise was a “flat tax” of 15 percent for individuals and companies. Both policies would be costly for Italy’s strained public finances.

The parties have also said they want to head off a value-added tax increase worth 12.5 billion euros ($14.9 billion) due to kick in next year unless alternative deficit cuts are found.

President Mattarella can veto the make-up of any new administration and would need to endorse the parties’ choice for prime minister before a government can be formed.

Additional reporting by Massimiliano Di Giorgio in Rome; Editing by Kevin Liffey

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