FILE PHOTO: Italian Interior Minister Matteo Salvini and Italian Prime Minister Giuseppe Conte attend a commemoration ceremony to mark the anniversary of the assassinations of judges Giovanni Falcone and Paolo Borsellino, in Palermo, Italy May 23, 2019. REUTERS/Guglielmo Mangiapane/File Photo
Matteo Salvini, Italian interior minister (left), and Giuseppe Conte, prime minister © Reuters

Italy’s ruling populist coalition is on the verge of collapse after prime minister Giuseppe Conte said on Thursday he would recall parliament from its summer break for a vote of no confidence, plunging the eurozone’s third-largest economy into political turmoil.

The no-confidence vote was requested by Matteo Salvini, the interior minister and leader of the far-right League, who railed against the Five Star anti-establishment party that is his coalition partner for opposing a bill to build a high-speed train link between Turin and Lyon in France.

Italian debt came under pressure following the move with two-year government bond yields rising 17 basis points to 0.225 per cent, while the yield on 10-year debt was 21bp higher. The rise in yield points to a drop in price.

The closely watched spread between Italian 10-year government bonds and German Bunds of the same maturity rose to as much as 2.339 percentage points, its highest level since June, because investors now place a higher risk premium on Italian debt.

Mr Conte, a law professor who was appointed by the government coalition when it was formed in June last year, criticised Mr Salvini on Thursday for seeking to bring down the government.

“He must . . . justify to the voters who believed in the promise of change, the reasons that have led him to interrupt early and abruptly the work of government,” Mr Conte said, after holding talks with president Sergio Mattarella and Mr Salvini.

The coalition, that combined the League, an old far-right pro-business party from the north, and Five Star, a grassroots movement of political novices with strong support in the poorer south, has been mired with tensions since the start. Conflicts have intensified since Mr Salvini’s League emerged as Italy’s biggest party in European elections in May.

In recent weeks, the coalition partners fought over issues including proposed tax cuts by the League and Five Star’s decision to back Ursula von der Leyen, the pro-EU German ally of Angela Merkel, to become president of the European Commission.

The latest bone of contention and apparent pretext for the collapse of the coalition is Five Star’s decision to vote against a motion on the trans-Alpine rail link with France, a project backed by Mr Salvini. However it did not prevent the train link from being approved by the Italian senate on Wednesday.

“We should immediately go to parliament to acknowledge that there is no longer a working majority as is shown by the vote on the TAV [a rail link to France] and the repeated insults to me and the League from our ‘allies’ and let’s quickly give the voters their say,” Mr Salvini said in a statement on Thursday.

Mr Salvini who faces a judiciary probe into allegations his party received funds from the Kremlin ahead of European elections, was under pressure from his team to act, politicians close to him said. The League party said in a statement new elections were “the only alternative to this government”.

There were “different visions [between Five Star and the League] on fundamental issues such as public works, infrastructure and development, fiscal shocks, autonomy of the regions, energy, justice and relations with Europe,” it said.

Five Star separately said that whoever started a crisis of government on August 8 “should assume the responsibility of bringing back a government of technocrats to Italy”.

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