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Italian president gives populist parties more time to propose cabinet

The Italian far-right League's leader Matteo Salvini

Financial markets have calmed amid increasing signs that Italy may avoid imminent elections after the president gave two populist parties time to figure out whether they can agree on an alternative to an anti-euro economy minister.

A day after the possibility of a governing coalition between the anti-establishment Five Star Movement and the right-wing League was revived, League leader Matteo Salvini cancelled appointments in northern Italy to travel to Rome.

Mr Salvini declined to respond to reporters' questions when he arrived at Fiumicino airport in Rome, and the news agency ANSA said he went straight to the lower house of parliament.

The two parties together won a narrow majority in elections on March 4.

They presented their proposed cabinet over the weekend, but President Sergio Mattarella vetoed their economy minister, collapsing the deal.

Luigi Di Maio, the Five Star leader, has proposed moving contested ministerial candidate Paolo Savona to a different cabinet post.

Mr Salvini said late on Wednesday that he is not closing the doors on any solution but also indicated some resistance to the change.

"If someone in Berlin or Paris wakes up in a bad mood that doesn't mean that an Italian minister gets kicked out," he said.

Mr Mattarella gave the leaders an unspecified amount of time to form a coalition government after markets plunged on news of a proposed interim administration that would take Italy swiftly to new elections.

Many worried that new polls would be a de facto referendum on Italy's membership of the euro.

Markets reacted with relief to the prospect of a political government.

The Milan stock exchange opened slightly higher yesterday, after already showing relief with a close up 2 per cent on Wednesday.

In another development, far-right Brothers of Italy leader Giorgia Meloni signalled she would support a populist government, reversing her previous position and giving the potential administration more breathing room to pass confidence votes in parliament.

Her party was part of a centre-right bloc including the League and Silvio Berlusconi's party ahead of the March elections.

ANSA also reported that the little-known law professor tapped by the Five Stars and the League as a premier-designate had skipped his class in Florence on Thursday to travel to Rome.

Giuseppe Conte had left Rome on Sunday, relinquishing his brief role as premier-designate, after Mr Mattarella rejected the populist parties' Cabinet list.

The president, in his role as guarantor of the constitution, said an anti-euro economics minister would endanger Italians' savings, which are safeguarded under the Italian constitution.

"We never put Europe up for discussion. We are in a European system and we want to remain," Mr Conte said in a brief video interview posted by the Nazione daily in Florence.

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