The anti-establishment 5-Star Movement and the right-wing League party are swearing in their Cabinet later Friday, capping a roller-coaster week of political and financial turmoil by agreeing to drop a proposed economy minister who had concerned Italy's president.
At an oath-taking ceremony in the presidential palace atop Quirinal Hill, the new premier, political novice Giuseppe Conte, and his 18 Cabinet ministers pledged their loyalty to the Italian republic and to the nation's post-war constitution in front of President Sergio Mattarella.
However, with tensions running high and some political leaders pushing for quick elections, events in Italy remained extremely fluid.Over the weekend, Mr. Mattarella rejected a euroskeptic figure the 5 Star and the League had chosen as economy minister for a coalition government that appeared close to taking power.
The new government must be confirmed by Parliament, where M5S and the League together command an absolute majority.
A government coalition has finally been reached in Italy, ending a months-long stalemate that seemed to be headed towards a snap election.
In an abrupt U-turn, he has now abandoned this idea and assented to Giuseppe Conte leading Italy and forming a coalition government consisting of anti-establishment parties Five Star (M5S) and the League.
Since the vote, Five Star leader Di Maio and Salvini, the League leader, were locked in talks with Mattarella and struggled to form a government.
European Commission President Jean-Claude Juncker told a conference Thursday that he loved Italy, but refused to accept the frequent pass-the-buck blame by Italian politicians that Italy's ills are the fault of the EU.
Earlier, he dismissed a Five Star offer to form a populist government, calling instead for early elections as soon as possible "but not at the end of July" because of holidays.
In other key government departments, lawyer and League senator Giulia Bongiorno will serve as Minister of Public Administration, and Italian army's former defence advisor Elisabetta Trenta as Defence Minister.
Wednesday's development came as financial markets calmed after a rout a day earlier, when investor concerns about Italy's finances prompted the biggest one-day rise since 1992 in Italian two-year bond yields and dented the euro's exchange rate.
Conte made no comment to reporters after his swearing-in ceremony in the president's 16th century palace in Rome, in a room with a huge gilt mirror flanked by Italian and European Union flags.
Conte was a professor of law at the University of Florence, who had offered ahead of the March election to serve as a 5-Star minister.
The role of economy minister was given to the less controversial Giovanni Tria, a political economist who advocates slashing taxes but is in favour of keeping Italy in the euro.
Maurizio Martina, leader of the Partito Democratico, accused the two parties on Twitter of having "a project to take Italy out of the euro zone, and they did it in a ruthless way".
Realizing he did not have the political support, Cottarelli stepped aside and let the two populist parties resume their plan to form a government.
The new government delighted leaders of an increasingly bolder far-right in European politics. "That means more work, less corruption, seriousness", he said.