Expert preparing for 'CATASTROPHIC event' which could HIT Italy and European banks

GETTYSavona is expected to be confirmed as Italy's new finance minister next week

GETTYSavona is expected to be confirmed as Italy's new finance minister next week

Italy's president has tapped politically inexperienced law professor Giuseppe Conte to be the premier who will head Italy's first populist government.

Italy was waiting Tuesday for caretaker prime minister and former International Monetary Fund economist Carlo Cottarelli to assemble a cabinet lineup for a technocrat government after a bid for power by an alliance of anti-establishment and far-right parties failed to get off the ground over the weekend.

The parliamentary election, held on March 4, failed to produce a clear victor but saw support for traditional parties collapse.

28 May: In a day of rapidly moving events, Mr Conte takes his cabinet choices to Mr Mattarella but the president vetoes the choice of Paolo Savona as finance minister. With both parties now in discussions again, there is a hope that the political impasse can be resolved which is helping to lift sentiment in the near-term.

The move led the prime minister-designate to step down, scuppering the bid by the anti-establishment Five Star Movement and the far-right League to form a government.

The two leaders, Luigi Di Maio of the 5-Stars and Matteo Salvini of the League, announced after meeting at the parliament that they had reached an agreement to form a political government - an outcome that avoids an interim, technical government and a swift return to the polls.

The European Central Bank is watching the political crisis in Italy but is unlikely to intervene at the moment, according to sources. Now the head of the Economy Faculty at Rome's Tor Vergata University, Tria has called for a debate on the euro in both Italy and in the rest of Europe.

Mattarella's office said it was studying Di Maio's proposal "with attention". Investors, fearing their holdings of stocks or real estate might be switched into a new Italian currency that would be worth less, would sell, causing markets to plunge.

By Wednesday, markets had largely recovered with the news of a second chance for a longer-term arrangement.

Matteo Salvini, the leader of the League, said the appointment of Mr Cottarelli was the death throe of a political establishment intent on keeping Italy "enslaved".

The contract called for heavy spending to introduce a basic income for needy Italians and a two-tier flat tax, as well as pension reforms, but was light on financing details.

President Sergio Mattarella will have to agree to the proposed coalition and cabinet. Salvini also put forward adding another member of the center-right bloc, Giorgia Meloni.

Mr Salvini said late on Wednesday that he is not closing the doors on any solution but also indicated some resistance to the change, saying "if someone in Berlin or Paris wakes up in a bad mood that doesn't mean that an Italian minister gets kicked out".

Italy's caretaker prime minister was assembling a cabinet lineup on Tuesday, May 29, despite nearly certain rejection by populist parties whose bid for power collapsed at the weekend.

The center-right alliance grouped the League with ex-Premier Silvio Berlusconi's Forza Italia and the smaller right-wing Brothers of Italy.

For one, despite it all, many Italians do not want to.

The tumult raised questions - in Brussels and among investors around the world - about whether the rise in Italian populism and the collapse of traditional parties posed a fundamental threat to the country's future in the eurozone.

"I am absolutely pro-Europe".

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