Italian bonds rebound on coalition deal

Mr Conte who has no political experience received the mandate last week from the pro European Mr Mattarella but talks failed

Conte, an academic and political novice, will head a government of ministers from the anti-establishment Five Star Movement (M5S) and the far-right League party.

The political upheaval will likely lead to new elections, and investors are interpreting the new vote as a referendum and that Italy could move closer to abandoning the euro if populist parties win the election. He once authored a plan that explained how Italy could "secretly" leave the single currency.

The eurosceptic coalition also promises a series of measures to reign in the European Union including renegotiation of European Union treaties and a review of the bloc's economic governance on issues such as the single currency.

On Saturday, German Chancellor Angela Merkel phoned Conte and invited him to visit soon.

Could tensions arise between the Five Star Movement and the Lega following the formation of a government?

Emerging from a similar meeting with a different ending Thursday night, Conte read off his Cabinet list and pledged that "we will work with determination to improve the quality of life of all Italians".

M5S leader Luigi Di Maio and League leader Matteo Salvini will join the government as deputy prime ministers. "The absorption of European Union funds could be improved so that people can feel the results on the ground more swiftly", the spokeswoman said.

Di Maio, the new economic development minister, reported for work after the parade to his ministry, which would have otherwise been closed for the holiday.

"The people have voted for us to increase security and that's what we're going to do", said Salvini, an ally of French far-right figurehead Marine Le Pen.

Just a short time earlier, President Sergio Mattarella's office announced that the new premier, University of Florence law professor Giuseppe Conte, and his ministers would be sworn in Friday afternoon.

The announcement indicated that President Sergio Mattarella had accepted all of the ministers proposed by the anti-EU 5-Star Movement and League on their second try.

After the collapse of the M5S-League government bid, the president nominated former International Monetary Fund director Cottarelli to form a technocratic government.

Savona, 81, was ultimately given a role in the government as minister of European affairs.

That helped deflate and, in many cases, erase earlier gains in financial markets from Chicago to Milan. On Tuesday, shares shedded 1.8 percent.

Yields on 10 year Italian government bonds have fallen 7.4 basis points to 2.98 today, having peaked at 3.45 yesterday.

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.

Italy has debts totalling more than 130 percent of its economic output, second in the euro zone after Greece, and is often described as "too big to fail" - - meaning the euro zone simply can not afford to bail out its third biggest member.

Three officials at the European Central Bank told Reuters the ECB was not considering any intervention as indicators were not yet showing signs of stress among banks and the central bank did not have the tools or mandate to solve what they said was being treated as essentially a political crisis.

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