Italy's president Sergio Mattarella will on Wednesday continue talks with pro-austerity premier designate Carlo Cottarelli on a technocrat government, as the gap in Italian and German 10-year bond yields reached a five-year high amid investor fears of a snap election.
Cottarelli, whom Mattarella asked on Monday to try and form a caretaker government, is close to giving up his bid and did not submit a cabinet line-up to Mattarella, parliamentary sources told Adnkronos.
Italy's grassroots Five-Star Movement and the far-right League party are demanding new elections in July and have said their lawmakers will not vote confidence in Cottarelli - a former International Monetary Fund director known as 'Mr Scissors' in Italy for his enthusiasm for spending cuts.
A nascent Five-Star-League government collapsed on Sunday after its premier designate Giuseppe Conte, a law professor, resigned when Mattarella vetoed the populists' choice of finance minister - the prominent eurosceptic economist Paolo Savona.
Italy has been in political limbo since the inconclusive 4 March national polls in which populist parties made strong gains but no single political force won an outright parliamentary majority. Several rounds of post-election talks with part leaders collapsed amid a mesh of seemingly irreconcilable demands.
Five-Star and the League may form an electoral alliance ahead of fresh elections and a survey for left-leaning daily La Repubblica on Monday predicted they could win 90 percent of seats in Italy's parliament in a re-vote.
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