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TEHRAN, May 29 - Italy's central bank chief warned on Tuesday that the state was "only ever a few short steps" from losing investors' trust as markets dumped stocks and bonds, fearing repeat elections will become a de facto referendum on the country's euro membership.
TEHRAN, Young Journalists Club (YJC) - Prime minister-designate Carlo Cottarelli is set to unveil his cabinet on Tuesday - he will meet President Sergio Mattarella at 1430 GMT - as tensions between the head of state and the two political parties he sidelined flared.
Cottarelli, a former International Monetary Fund official who Mattarella chose on Monday to head a stop-gap government leading to early elections, was due to meet the head of state in the afternoon.
The anti-establishment 5-Star Movement and the far-right League, the biggest winners from inconclusive elections in March, abandoned plans to form a coalition government at the weekend after Mattarella vetoed their choice for economy minister, an 81-year-old who has argued for Italy to leave the euro.
Investors believe that Cottarelli, 64, will fail to muster support to pass a budget, leading to repeat elections in the autumn when the two eurosceptic parties could return with even stronger representation in parliament.
A new poll by the SWG organization showed support for the League had jumped to 27.5 percent, up about 10 points from the March 4 elections. While the 5-Star would fall about three points to 29.5 percent, the two combined would have a 57 percent majority in parliament if they decide to join forces again.
Such worries sent Italian stocks to their lowest level since July 2017, dragged down by a selloff in the shares of banks - many of which have invested heavily in the Italian government debt that is now falling sharply in value.
This selloff pushed up yields on the debt. Those on two-year bonds, the most sensitive to political upsets, were set for their biggest one-day jump in 26 years.
The continuing uncertainty in the euro zone's third biggest economy also helped the euro tumble to fresh multi-month lows. Investors had already worried about the proposed coalition's ambitious spending program for a country which already has the third highest public debt in the world - plans that were likely to bring it into conflict with the European Union.
Source: Reuters
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