5-Star, League Reach Agreement On Government: Savona To Be Minister Of EU Affairs

The Italian political crisis may be (almost) over (for now).

According to La Stampa, Italy's populist ruling parties, the 5-Star and the League, have reached an agreement in which the controversial nominee for finance minister, 82-year-old euroskeptic Paolo Savona, will instead become EU affairs minister while the pro-Euro public servant, Giovanni Tria who is currently President of the Italian National School of Public Administration, will take the sensitive post of finance minister. Enzo Moavero-Milanesi, who previously served Minister of European Affairs in the Monti Cabinet and the Letta Cabinet, will become Foreign Minister.

Paolo Savona

Bloomberg confirms as much:

  • *FIVE STAR, LEAGUE DEAL EXCLUDES BROTHERS OF ITALY: OFFICIAL

The deal also excludes the far-right Brothers of Italy, which had campaigned with the League in center-right alliance.

While numerous caveats remains, as noted by Bloomberg's Paul Dobson...

There are still reasons to be cautious. Euro-skeptic Savona is mooted for European affairs minister! And there's still the risk of an "accident" bringing Italy to loggerheads with Brussels over debt and deficit rules if the populists pursue their stated intentions...

... for now this appears a better and solution for Italian and European financial markets than fresh Italian elections, the prospect of which has shaken European markets further boosted by the non-negligible risk of Italy ending up leaving the euro.

As a result, the news spiked risk assets in the US:

... while the 2Y ITA-GER spread collapsed by 40 pips in kneejerk response.

And so for all the badmouthing, it appears that the EU's German budget minister Oettinger, who said that the market will dictate the Italian government, was correct.

Below is Giovanni Tria's CV, whose highlights are as follows:

Economist with more than 35 years of professional and academic experience as expert of economic development, business cycle and growth, public investment assessment and project evaluation, role of the governance of the institutions on the growth process. He has worked extensively on the formulation and management of macro-econometric models for economic forecast and the simulation of economic policies, contributing to the periodical formulation of economic forecast reports.

Member of the Italian Economic Society

Member of the American Economic Association

Degree in Law, University of Rome "La Sapienza", 1971

CURRENT POSITIONS: President of the Italian National School of Public Administration