Italian populist PM nominee bids to finalise cabinet

Italys prospective new prime minister Giuseppe Conte laboured Friday to finalise his government team as a battle heated up over the eurosceptic coalitions pick for economy minister.

After a new day of negotiations, Conte went to the presidential palace Friday evening for an "unofficial meeting" with President Sergio Mattarella to discuss the future cabinet, Italian press agencies reported.

Mattarella on Wednesday approved Conte's nomination to be prime minister of a government formed by the anti-establishment Five Star Movement and the far-right League.

But as Conte, 53, held a meeting Friday with Five Star leader Luigi Di Maio and League chief Matteo Salvini to discuss their cabinet picks, the issue remained over Salvini's favourite for the economy ministry, the noted eurosceptic Paolo Savona who once described the euro as a "German cage".

Mattarella is reportedly worried about giving the Savona the role, and his approval the new government cannot get off the ground.

On Thursday Salvini said that he could not see "why anyone would say no" to 81-year-old Savona, adding "there can't be any vetoes" on the ministerial team.

Salvini's comments irritated Mattarella's staff, who underlined that as per the Italian constitution the discussion over ministers was now a matter for Conte and the head of state.

"The issue isn't vetoes but the unacceptability of diktats towards the prime minister and president of the republic," the president's office said in a statement.

Despite the question mark over Savona's fate, Di Maio told journalists that Friday's meeting "went very well" as he left.

"It's as if we've been working together for years," he said.

"There is a total synergy and harmony and we are working fast to deliver the "government of change" as soon as possible."

Italian media said that Salvini was expected to become interior minister, while M5S leader Di Maio, would head an expanded Ministry of Economic Development and Labour.

Economic concern

The suspense over the future finance minister of the third largest economy in the eurozone is causing concern in Brussels and on the financial markets.

The difference in yield on Italian 10-year sovereign bonds compared to Germany's reached 217 points Friday afternoon -- the highest level since December 2013 -- before dropping slightly to 206 points at close.

Officials in Brussels have voiced concern that Italy could trigger a new eurozone crisis by refusing to stick to the bloc's public spending and debt targets.

The joint government programme unveiled by Five Star and the League last week pledges anti-austerity measures such as drastic tax cuts, a monthly basic income and pension reform rollbacks, which Di Maio and Salvini claim will boost growth.

The European Commission's vice-president for the euro, Valdis Dombrovskis, issued a new warning to Italy on Friday as he arrived at a meeting with EU finance ministers.

"Our message from the European Commission is very clear: that it is important Italy continues to stick with responsible fiscal and macro-economic policies," Dombrovskis told reporters.

That was the second time in a week that he had warned Italy against "irresponsible" spending, and on Thursday the European Central Bank (ECB) offered similar guidance.

"A loosening of the fiscal stance in high-debt countries could impact the fiscal outlook and, by extension, market sentiment" towards governments when they try to sell bonds, it said in its bi-annual financial stability report.

The ECB holds around 17 percent of Italy's 2.3-trillion-euro ($2.7-trillion) public debt.

On Friday, outgoing centre-left prime minister Paolo Gentiloni shot a warning at the nascent government during his departure ceremony.

"Going back up the slope as Italy has done these last five years is not simple, it requires perseverance, consistency and sacrifice. To undo this work, it doesn't take five years, sometimes a few months, even a few weeks," he said.