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Italy's PD raises the bar for possible government with 5-Star

Kitco News

ROME (Reuters) - Italy’s center-left Democratic Party on Thursday set tough new conditions for forming a coalition with the anti-establishment 5-Star Movement, making a deal between the traditional foes look more elusive and raising the chance of snap elections.

The euro zone’s third-largest economy is in political turmoil after its government, riven by months of infighting, collapsed this week, forcing Prime Minister Giuseppe Conte to resign just as Rome was to begin preparing the 2020 budget.

The collapse was triggered by the right-wing League party whose leader Matteo Salvini declared the ruling coalition dead two weeks ago, saying he could no longer work with 5-Star, his coalition partner.

Salvini, the interior minister, called for elections, aiming to cash in on his surging popularity to return to power as prime minister with a mandate to launch a big spending spree next year and challenge the European Union’s fiscal rules.

However his move could backfire because the head of state, Sergio Mattarella, will only dissolve parliament if no other coalition can be formed, and now 5-Star and the PD are looking at a possible tie-up to sideline Salvini.

Mattarella was consulting with the main parties in parliament on Thursday and telling them he wants a deal within the next few days if they want to avoid snap elections, a source close to the matter told Reuters.

Markets have rallied on hopes that a deal was in the offing, dismissing stumbling blocks such as the lack of any agreement between the parties over who should be prime minister.

On Wednesday, PD leader Nicola Zingaretti laid down five conditions that should form the backbone of any accord — “loyal membership” of the European Union; giving parliament a central role; economic development based on environmental sustainability; a change in handling migrants and a change to economic policy to boost investment.

Those seemed low hurdles for 5-Star to clear, but Zingaretti then added that he would also not accept giving a fresh mandate to the outgoing Conte, a technocrat who is close to 5-Star.

On Thursday he raised the stakes further with three more specific conditions: 5-Star must agree to repeal laws on security and immigration passed during its coalition with the League, revise a plan to cut the number of lawmakers to 600 from 945 and immediately commit to a framework agreement with the PD on the 2020 budget.

5-Star’s support has slumped over the last year and it does not want a return to the polls but it has warned the PD that it should not push too hard.

“We will not accept the PD’s vetoes, they can’t say we must accept their five points or it’s no deal, that Conte must go or it’s no deal,” said Manlio Di Stefano, a junior foreign minister and one of 5-Star’s most prominent lawmakers.

Mattarella is due to meet 5-Star’s delegation at 1500 GMT, after which its leader Luigi Di Maio is expected to set out his party’s position.

Additional reporting by Angelo Amante; writing by Gavin Jones, Editing by Mark Bendeich and Jon Boyle

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