Italy's populists head for coalition government

The left-wing Five Star Movement (M5S) and the far-right League, two of Italy's biggest anti-establishment parties, on Thursday said they had made "significant steps" towards forming a coalition government.

Italy has been in a political deadlock since inconclusive elections in March. But the two parties made a breakthrough on Wednesday, when former Prime Minister Silvio Berlusconi said he wouldn't prevent the two parties from forming a government.

Read more: Luigi Di Maio: The populist leader eyeing victory in Rome

Tough talks

• The parties said they're hoping "to determine everything rapidly to quickly give the country some answers and a political government."
• Lawmakers representing both parties will meet on Thursday to negotiate legislative priorities for the coalition government. The agenda will form part of a formal coalition agreement similar to that in Germany.
• But the Italian president, Sergio Mattarella, warned both euroskeptic parties against undermining the country's status in the EU, saying they would be "consciously tricking public opinion" by suggesting Italy could get on without the bloc. Both parties want to exit the eurozone and renegotiate EU budgetary restrictions.

Read more: Italian President Sergio Mattarella calls for 'neutral government'

'Uncertainties'

M5S leader Luigi Di Maio (pictured above) took to Facebook to say: "I cannot disguise my joy and happiness that we can finally start solving Italy's problems."

League leader Matteo Salvini said in a post on Twitter: "We're working for you," referring to his campaign slogan: "Italians first."

But some analysts were worried. "The prospect of having a government of two euroskeptic parties creates uncertainties," said IG Markets analyst Vincenzo Longo.

Read more: Matteo Salvini: Italy's far-right success story

Why now? Although Di Maio's M5S led the election with 32 percent of the vote, the League-led right-wing coalition managed to secure a combined 37 percent. However, both political forces failed to reach the 40 percent necessary to govern.

Since the elections, Di Maio has signaled his party's willingness to form a government with the League if it ditched its alliance partner, the Berlusconi-led Forza Italia. On Wednesday, Berlusconi said he would no longer be an obstacle if the League wanted to try to form a government with M5S.

What do they want to change? Both M5S and the League have rejected what they see as Brussels-imposed budget limitations, saying they want to renegotiate such bloc-wide regulation.

They also want to hold a referendum on Italy's continued membership of the eurozone and reform the pension and tax system. Only M5S has signaled its intention to one day hold a referendum on Italy's membership in NATO.

Read more: Who are Italy's two leading populist parties? What you need to know about the 5 Star Movement and the League

What happens next? Italian President Sergio Mattarella has reportedly given the parties until Monday to inform him of their plans to form a government, which would include jointly nominating a prime minister. The proposal for a government must be approved by the president before it goes to a vote in Parliament.

ls/kms (AP, Reuters, dpa)

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