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Italy's Di Maio warns snap elections could still happen as he gives opposition PD party an ultimatum

Key Points
  • Longtime animosity between M5S and PD had made the alliance an unlikely one, but it now seems to be in doubt after fresh comments from Di Maio.
  • Italian stocks slipped Friday afternoon after a week of solid gains.
  • Investors had cheered the prospect of a M5S-PD pact which Prime Minister Guiseppe had been given a mandate to form earlier this week.
VIDEO2:1202:12
M5S' Di Maio: If this government is formed it needs to carry out reforms

Luigi Di Maio, the leader of Italy's Five Star Movement (M5S), is taking a tough stance with his proposed new coalition partners in Rome, saying the Democratic Party (PD) needs to accept a string of policy demands to fulfill a power-sharing agreement.

Italian stocks slipped Friday afternoon after a week of solid gains. Investors had cheered the prospect of a M5S-PD pact which Prime Minister Guiseppe had been given a mandate to form earlier this week.

The two left-leaning parties were due to take over from a rocky coalition between M5S and the right-wing Lega party — which crumbled last week after coming to power in June 2018.

Longtime animosity between M5S and PD had made the alliance an unlikely one, but it now seems to be in doubt after fresh comments from Di Maio.

When asked by CNBC's Joumanna Bercetche about concerns over another election, given low approval ratings for M5S, Di Maio replied: "I believe that we can go to elections at any time in Italy. The truth is that those who now have pulled down the government and are asking for elections (are doing it) because they are running away from the electoral promises that they had made."

VIDEO2:1002:10
M5S' Di Maio: I want to give a government to this country, but not at all costs

When later asked about the probability of a snap election happening by the end of the year, he added: "I don't know but I want to give a government to this country, but not at all costs."

Di Maio explained that if this new government with PD were to be formed, then "it needs to carry out reforms that Italians have been waiting for for years, reforms on justice, on taxation, on employment, on health, on welfare."

His comments come after he dragged Italian stocks lower earlier in the trading session, outlining his demands to the PD party.

"Our program points are clear. If they are included in the government program, then we can start. If not, it would be better to go back to elections, and, I might add, as soon as possible," Di Maio told reporters Friday, according to Reuters.

Italy's FTSE MIB closed 0.35% lower Friday despite a broader rally around the rest of Europe.

Some of the measures he mentioned included a drive to cut the number of parliamentarians, and approving a law aimed at clamping down on migrant sea rescues. These measures have already reportedly been rejected by the opposition PD party and its deputy leader Andrea Orlando described the new comments as "incomprehensible" on Twitter.

Failure to reach a new pact would see political turmoil return to Italy and increase the chances of snap election. Lawmakers also need to agree on a new budget in the coming months which has only increased the pressure of forming a government.

5-Star Movement leader Luigi di Maio speaks to the media after consultations with Italian President Sergio Mattarella in Rome, Italy, August 28, 2019.
Ciro de Luca | Reuters

Earlier this week, PD had set aside its differences with the anti-establishment Five-Star Movement (M5S) and looked set to create a new coalition in Rome.

Matteo Salvini, a former deputy prime minister and leader of the Lega party, called for a snap election earlier in August. He declared the Lega-M5S coalition unworkable and pushed for a no-confidence vote in Prime Minister Giuseppe Conte — which ultimately failed.

However, opinion polls suggest Lega is the most popular party in the country and political experts are eagerly anticipating Salvini's next move.