Economist to lead Italy to new election amid political drama

New premier-designate Carlo Cottarelli (right) addresses the media after meeting with Italian President Sergio Mattarella, at the Quirinale Presidential Palace, in Rome, Monday, May 28, 2018.(Alessandro Di Meo/ANSA via AP)

ROME  — Amid growing political turmoil, economist Carlo Cottarelli was tapped on Monday to lead Italy to early elections, possibly as soon as after the summer, after populist parties failed to convince the president their Cabinet picks wouldn’t destroy international investors’ faith in the country.

A former International Monetary Fund official and specialist in budget-slashing, Cottarelli told reporters at the presidential Quirinal Palace that he had accepted President Sergio Mattarella’s request to form a government “that will bring the country to new elections.”

Inconclusive March 4 elections had left the country with what has proved to be an intractable political impasse. Markets have begun to take fright, with bond markets suggesting investors are becoming more cautious about lending to Italy.
Cottarelli expressed hope his appointment could calm the markets.

“In the last few days, tensions have increased in the financial markets,” the premier-designate said. “In any case, the Italian economy is growing, and the public accounts remain under control. A government led by me would assure prudent management of our public accounts.”

But with the prospect of anti-euro political sentiment suddenly gaining traction in Italy, and another election approaching, markets remained on edge Monday. The government’s benchmark borrowing rate increased further, a sign of caution, even after Cottarelli was tapped. The 10-year rate hit 2.6 percent Monday, up sharply from 1.7 percent last month. That is still very manageable for the government, however, and well below the 7 percent that forced a change of government in 2011.

Weeks ago, an exasperated Mattarella had told the nation that if Italy’s squabbling parties failed to join forces for Italians’ common good and forge a viable coalition, he would tap a technocrat, an expert not directly affiliated to political parties, to take the country to elections by year’s end.

That is what ultimately happened after Mattarella on Sunday night refused to approve the populists’ choice of an economy minister who has raised the specter of Italy having to someday exit from the euro, the EU currency shared by 19 countries.

The 5-Star Movement and the right-wing League, the euroskeptic parties who were thwarted in their bid to give Italy its first populist government, have vowed to give Cottarelli the thumbs down in required confidence votes in Parliament.

A government led by Cottarelli “is born dead,” said 5-Star proponent Manlio Di Stefano. “It makes no sense to speak about it in a serious way.”

In his brief remarks, Cottarelli made plain he knew any government of fellow technocrats he assembles might not be approved by Parliament.

“In case of failing to win the confidence votes, the government would immediately resign, and its task would be that of routine administration until elections after the month of August,” he said.

Cottarelli said that should his proposed Cabinet be confirmed in Parliament, he would set to work to ensure the country’s official budget is approved by lawmakers. The budget law must be approved by December.

After that, Mattarella would dissolve Parliament and set elections for 2019, Cottarelli said.

Mattarella’s veto enraged both League leader Matteo Salvini and the 5-Stars’ Luigi Di Maio, who threatened to start impeachment proceedings against him.

Mattarella said he had vetoed Salvini’s economy minister candidate to spare Italian investors, businesses and families seeing more of their resources “burned” up by nervous markets losing faith in Italy’s willingness to back the euro and European Union.

In an interview with Radio Capital on Monday, Salvini wondered aloud who would vote for Cottarelli. Mattarella “didn’t give the center-right the chance to form a government because we didn’t have the votes, and now Mr. Cottarelli arrives without any votes? It seems a stretch,” Salvini said.