The spectre of a financial crisis came back to haunt Italy yesterday, as its markets plunged on fears that it is heading towards another election that could shape up to be a referendum on whether to stay in the common currency.
President Sergio Mattarella had summoned Cottarelli to his office after rejecting 81-year-old euroskeptic economist Paolo Savona for economy minister, because he had threatened to pull Italy out of the euro zone.
The paper suggests that "a fiscal stimulus can and must be designed so as to target both aggregate demand and potential output".
However, the gains were soon wiped out and analysts warned that any Cottarelli-led government was unlikely to win a confidence vote in parliament, meaning it would serve merely as a caretaker until new elections can be held.
Enzo Moavero, a former European Union affairs minister under Prime Minister Mario Monti, is slated ty become foreign minister in the Conte government. The scholar already served as advisor to Italy's Prime Minister for EU affairs and privatization of state-owned companies between 1993 and 1995, and as Minister of European Affairs between 2011-2013 and 2013-2014, according to his online resume.
The deal followed an extraordinary few days in which Di Maio called for Mattarella to be impeached, Conte and another prime minister-designate were tasked to form a government and failed, before Conte was reinstated on Thursday evening.
The two parties have proposed law professor Giuseppe Conte to be the new prime minister.
News agency ANSA said he went straight to the lower house of parliament, where he met with 5-Star leader Luigi Di Maio.
However, they seem to disagree on whether an election or a new government now is the best option.
Asian equities and the euro sank Wednesday as turmoil in Italy sparked a frantic dash for safety, while investors have also been spooked by fresh worries about the China-US trade row.
The former International Monetary Fund official Mattarella named as premier-designate of a technical government stepped down earlier Thursday.
He is also a fierce critic of Brussels and has called for closer ties to Russia.Di Maio will take on a powerful new post that will combine labour and industry portfolios in a move that could mark big changes to labour and environmental policies, given the M5S's stated opposition to big industry.Giovanni Tria, a little known economics professor, was named to lead the finance ministry.
President Sergio Mattarella approved Conte's appointment last week - but the next day rejected the politician's choice of finance minister, forcing Conte, 53, to abandon his attempt to form a government.
The most famous example of a president denying a PM's choice was in 1994 when Eugenio Scalfari refused then prime minister Silvio Berlusconi's choice of his own lawyer - Cesare Previti - as justice minister.
With global markets in freefall at the prospect of a possible resurgence of the euro crisis, the populist leaders held on and emerged victorious as their revised cabinet was accepted late on Thursday.
The foreign minister will be pro-European Enzo Moavero Milanesi, a former minister for European affairs.
The League, which won 17 percent of the vote in March, would surge in any early ballot, polls show, while support for 5-Star remained strong, above 30 percent.
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