Italy M5S leader says govt deal would be 'bomb' for establishment

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League leader Matteo Salvini and 5-Star Movement leader Luigi Di Maio are insisting they are close to a deal created to help ordinary Italians.

The two pre-election adversaries began negotiating a coalition deal last week, more than two months after an inconclusive March 4 election produced a hung parliament.

Italy's two anti-system parties appeared on the verge of clinching a deal to form a coalition government, rattling markets with radical ideas to free up billions of euros for tax cuts and welfare.

The dollar added to recent gains against a basket of currencies on Wednesday to touch a five-month high, supported by relatively robust US economic data in recent days, while the euro was hit by reports that a likely future Italian government would seek debt forgiveness from European creditors.

The opposition Democrats have warned that the League's vow to drastically lower taxes to a flat 15-percent rate and the 5-Stars' promise of subsidies to the poor will drastically drive up government borrowing.

He was referring to the large numbers of migrants coming into Italy whom many in the country blame for crime. "Momentum would certainly seem to back a further dollar advance with little to stop US 10-year Treasury yields pushing to 3.20 percent", ING FX strategist Viraj Patel said. In recent days, Mr Salvini has been trying to push Mr Di Maio towards a more confrontational attitude with regard to Brussels on everything from the single currency to budget rules and migration policy.

According to Italian media reports, their nominee for Prime Minister is likely be from a "third party" and will have to be able to make the eurosceptic nature of the new government workable with Brussels. The sanctions have had a major knock-on effect on the Italian economy, as Russia is a top importer of Italian products and one of the top European tourist destinations for Russian travellers.

"Italy were already fancied to be the next country to exit the European Union at 9/4 and recent coalition talks have only extended their lead at the front of the queue to 6/4".

Salvini and Di Maio have not denied the authenticity of the document, but suggest it is an older version, with the latter making it clear that he wants to reverse the process of European integration to the pre-Maastricht Treaty-era and end EU-wide financial policy alignment.

Both parties have a history of Euroscepticism.

In a meeting with Mattarella on Monday, 5-Star proposed little-known law professor Giuseppe Conte, but the League has not yet given its go-ahead, a source in the president's office said. 5-Star has moderated its position considerably in the a year ago, rowing back on a previous plan to hold a referendum on Italy's membership of the currency bloc. However, the League still wants to leave the euro zone as soon as politically feasible. They also taunted Brussels by warning that if European Union capitals were concerned, "then we're doing something right". Each party plans to consult its supporters over the weekend to see if they back the nascent government pact. "The would-be coalition's denials that leaked draft policies were ever concrete plans also helped smooth markets", said Ken Odeluga, an analyst at City Index.

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