Italian Prime Minister Giuseppe Conte was given a mandate to form a new government Thursday, as the opposition Democratic Party (PD) set aside its differences with the anti-establishment Five Star Movement (M5S) to create a left-leaning coalition.
Conte announced his intention to resign last week after a rocky power-sharing agreement between M5S and the right-wing Lega fractured. But following consultations with Italian President Sergio Mattarella, M5S came to a new arrangement with PD on Wednesday evening. On Thursday morning, Mattarella met with Conte and handed him a fresh mandate to form a government, which Conte accepted, and which will allow him to stay on as Italian leader.
"In the coming days I will return to the president of the republic ... and submit my proposals for ministers," he said Thursday, according to Reuters.
Conte had been put under pressure by Matteo Salvini, a former deputy prime minister who leads the Lega party, and called for a snap election earlier this month. Salvini declared the populist coalition government unworkable and called for a no-confidence vote in Conte.
Conte is a law professor who was appointed by both the M5S and Lega parties last year but is not affiliated with either. Italy — the third largest euro zone economy — had been governed by the two-party coalition since elections in March 2018 yielded no outright winner in Rome. This coalition had been on a rocky path since it came to power. Some of the tension had been caused by government appointments, the country's relationship with the European Union, and, more recently, a high-speed rail link.
In the last week investors have cheered the prospect of this new coalition being formed between two parties from the political left: the populist M5S and the more European-friendly PD. Italy's FTSE MIB climbed 1.2% on Thursday morning on the political developments.
But many have their doubts over this new alliance as both parties have been heavily critical of the other in the past. The unlikely pact would in theory enjoy a relatively comfortable majority in the parliament's lower house, the Chamber of Deputies, but would rely on a handful of sympathetic but unaligned senators if it were to win votes in the upper legislative chamber.
Political experts will now contemplate Salvini's next move after the Lega party effectively ignited the split that has outed it from power. Lega still enjoys top spot in the public opinion polls despite initially being the junior coalition partner after the 2018 election.
—CNBC's Silvia Amaro and Willem Marx contributed to this article.