Two anti-establishment parties in Italy are set to present details of a coalition agreement Monday, but market participants do not seem substantially worried about the prospect of a populist government.
The left-wing Five Star Movement (M5S) and the right-wing Lega are due to meet the country's president Monday afternoon to outline plans for a new government, potentially breaking months of political deadlock. The two parties will put forward names to be the next prime minister. Giulio Sapelli, an economics professor, is supported by M5S while Lega is backing law professor Giuseppe Conte, according to Italian newspaper Corriere. President Sergio Mattarella will then have the final word.
If approved, the deal will avoid a repeat of the March general election. M5S was the most voted for party in the election but didn't receive enough votes to govern alone. Meanwhile, Lega saw a better-than-expected result and was endorsed to form a government with the backing from other right-wing parties.
Analysts expect that, if in place, the new government would mean a significant fiscal slippage. But, they are also confident that despite being from opposite ends of the political spectrum, these two parties will manage to overcome their differences.