May 31, 2018 / 9:21 AM / 19 days ago

Italy awaits decision on last-ditch deal to avoid snap elections

ROME (Reuters) - Italy on Thursday was awaiting a decision from right-wing leader Matteo Salvini on whether to join a last-ditch attempt to form a government and avoid snap elections that would be focused on membership of the euro zone.

Salvini, the head of the League, has said he would “seriously consider” an offer on Wednesday from 5-Star leader Luigi Di Maio to resurrect their bid to govern together.

The first effort by the two largest anti-establishment forces was torpedoed on Sunday when President Sergio Mattarella rejected their candidate for economy minister - 81-year-old economist Paolo Savona, who has spoken out forcefully against the single currency.

Mattarella then appointed a former International Monetary Fund official, Carlo Cottarelli, to form a stop-gap government of experts to lead the country to snap elections. But Cottarelli has so far failed to form a viable cabinet.

Di Maio, whose 5-Star emerged from the inconclusive March 4 elections as the largest single party, urged Salvini to drop his insistence on Savona for the economy portfolio and agree to give him another post in the next government.

“Di Maio - Salvini: the Final Deal,” was the headline in Corriere della Sera newspaper, echoing the national feeling of crisis put into a holding pattern.

Salvini cancelled his scheduled appointments in northern Italy to fly to Rome and was expected to have a private meeting with Di Maio, a political source said.

Opinion polls show Salvini’s League would see huge gains in any early elections while the 5-Star would remain steady.

Italian stocks were trading higher as signs emerged of a compromise to avoid snap elections that could be dominated by the issue of euro membership, calming investors.

Borrowing costs meanwhile edged lower. Italy’s 2-year government bond yield, which has been the focus of a recent selloff, was down as much as 95 basis points at 1.40 percent.

The latest development came amid a general calming of financial markets after Tuesday’s rout, when investor concerns prompted the biggest one-day rise since 1992 in Italian two-year bond yields and dented the euro’s exchange rate.

“I have lost my patience. I have had enough, that is the truth,” said exasperated Rome resident Teresa Gallo as she was walking to a market for her regular morning shopping.

Two polls released on Wednesday night showed that between 60-72 percent of Italians want the country to remain part of the euro while 23-24 percent would choose to drop the common currency.

Lupo Rattazzi, a prominent Italian businessman, ran a full-page advertisement in several national newspapers addressed to Salvini and Di Maio, warning their electorate of the dire consequences of leaving the euro.

The Italian flag waves over the Quirinal Palace in Rome, Italy May 30, 2018. REUTERS/Tony Gentile

Additional reporting by Eleanor Biles, Giselda Vagnoni and Stefano Bernabei in Rome and Steven Jukes and Francesca Landini in Milan, writing by Philip Pullella; Editing by Richard Balmforth

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