July 18, 2019 / 12:57 PM / 5 months ago

Italy's warring coalition parties warn of govt collapse

* League, 5-Star clash over new EU Commission chief

* League leader warns he may quit government

* 5-Star says threats from League must stop

* Often jittery financial markets remain calm

By Crispian Balmer and Angelo Amante

ROME, July 18 (Reuters) - The leaders of Italy’s coalition partners the League and 5-Star Movement warned on Thursday the government could collapse following mutual recriminations over the election of the next European Commission president.

While the League voted against the mainstream German candidate Ursula von der Leyen for the powerful EU post, the 5-Star backed her this week in the European Parliament, with its support proving decisive in guaranteeing her promotion.

Deputy Prime Minister Luigi Di Maio, who heads 5-Star, said the League position risked isolating Italy, while League leader Matteo Salvini accused his partner of betraying ordinary voters after promising to bring change to Europe.

In an interview with Corriere della Sera, Salvini said he was tired of facing resistance from 5-Star in other areas, including granting Italy’s regions greater autonomy.

Asked if this meant the government would fall, he replied: “That’s up to 5-Star. Either we get things done, or we don’t.”

Di Maio hit back, saying the government could not carry on in a climate of distrust and constant threats. “If the League wants to topple the government, then it must say so clearly”, he said in a video posted on Facebook.

Italian political commentators have long speculated that the window for a government collapse would close on July 20, because after that date any new election would be pushed too deep into the autumn to enable the 2020 budget to be approved — key legislation around which the political calendar is built.

Italy has never held an election in the autumn or winter.

However, Salvini said there were no such restrictions.

“I don’t believe in windows and I don’t believe that we only have two or three days,” he told Corriere.

CALM MARKETS

Salvini is facing significant pressure from within his party to pull the plug on the government which took office last June after an inconclusive national election, with League officials accusing 5-Star of repeatedly thwarting their policy agenda.

“Game Over. Don’t they understand,” foreign affairs ministry undersecretary and senior League politician Guglielmo Picchi wrote on Twitter.

Past turmoil in the government has immediately fed through to financial markets, with investors nervous that political instability could further damage Italy’s fragile state accounts.

However, there was little sign of anxiety on Thursday, with Italy’s bellwether 10-year bond yields hitting their lowest level in almost three years on Thursday, squeezing the gap on top-rated German bond yields to its tightest in over a year.

Hostility between the League and 5-Star intensified following European parliamentary elections in May when the League jumped above 5-Star to become the largest party in Italy. Support for it is now approaching almost 40 percent.

But Salvini has also come under pressure in recent days over allegations his party sought illegal funding from Russia to fund its successful EU election campaign — a charge he has denied.

5-Star has called on Salvini to address parliament on the accusations, but in a sign that Di Maio wants peace with Salvini, he said on Thursday he did not believe the League had received any illicit cash from Moscow.

“If I had the slightest suspicion that the League had taken money from Russia, I would not be in government with them”, he said. (Writing by Crispian Balmer; Editing by Toby Chopra)

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