MNI SOURCES: Bulk Of Italy's Democrats Open To 5-Stars Deal

By Silvia Marchetti

     ROME(MNI) - The majority of Italy's Democrat Party is likely to support an

alliance with the 5-Stars Movement to form a new coalition government and head

off the prospect of a snap election which could leave the far-right League in

control of the country, sources told MNI, cautioning that some members of both

parties are resisting a deal.

     A major focus for negotiations will be coming up with a budget law which

averts automatic tax increases under the country's fiscal commitments to the EU.

     "Whatever government takes over its priority must be to avoid an automatic

VAT rise of E23 billion next year and approve a budget law by end of December,

but it also needs to have the necessary parliamentary majority to last until the

end of the current legislature in 2023," a Democratic Party official told MNI.

     Former premier and party leader Matteo Renzi, who has spoken in favour of

an alliance with the 5-Stars, potentially as part of a fresh administration

under recently-resigned PM Giuseppe Conte, has the support of the majority of

Democrats sitting in both branches of parliament, said a source close to Renzi.

Current Democrat leader Nicola Zingaretti who is against serving with Conte

although open to a deal with other parties, is not a member of parliament, the

source noted.

     Key to any future alliance agreement for the Democrats would be pro-growth

measures to favour investment and social inclusion, a new immigration policy, a

more pro-European stance and environmental-friendly laws, sources close to

Zingaretti said. All of these would be in line with recent positions taken by

5-Stars, which has distanced itself from its former coalition partners in the

League, whose leader Matteo Salvini precipitated the collapse of the government

and which leads national opinion polls.

     Both Democrats and 5-Stars are also in favour of cutting firms' labour

costs. A mooted constitutional reform, which would reduce the number of

parliamentarians and also potentially stave off early elections until at least

2021, is not a priority for the Democrats, the sources said.

     Sources close to the 5-Stars Movement told MNI that Italy will only avoid

an early election with "catastrophic" economic consequences if there is a deal

between the two parties, together with smaller centre-left groups. But they

recognised that any agreement would be "tough" with their "long-term enemies."

     "We're not prepared to compromise on our key measures, like the citizenship

wage, which is already law, but there could be some room for adjustment there.

Also, with the League's flat tax out of the way, which required about E20

billion, we'd have more budget leeway."

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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