REPEAT: MNI: 5 Star/Lega Tie-Up May Trigger Italy Debt Crisis

Repeats Story Initially Transmitted at 11:38 GMT Jan 24/06:38 EST Jan 24

By Silvia Marchetti

     ROME (MNI) - Italy would be in danger of a fresh sovereign debt crisis if

the Lega Party and the anti-establishment 5 Star Movement allied in order to

form a new government, a leading political analyst told MNI.

     "I see a dangerous convergence ahead between the two groups after the March

4 elections," said Sergio Fabbrini, president of the School of Government at

Rome's LUISS University.

     "Both preach the supremacy of Italy's sovereignty at the detriment of the

broader European integration project and this would end up harming our country's

position on the world stage," he said.

     --NO EURO EXIT

     Nicola Molteni, Lega's deputy head in the Lower House, argues that all

European treaties must be revised to boost national sovereignty. Five Star share

the same view but both parties have dropped the option of a euro exit from the

plans.

     "The strict austerity rules of the stability and growth pact, the fiscal

compact on debt reduction, the Dublin Treaty on immigration and the new bail-in

banking regulation all penalise Italy in favour of strong European sovereignty

that resembles a tyranny," Molteni told MNI.

     Lega and 5 Star are united by anti-migrant policies based on forced

push-backs of refugees and by a series of unlikely social reforms -- primarily a

pensions overhaul unaffordable for Italy's already stretched public coffers --

that clash with European goals, said Fabbrini.

     The two parties are unlikely to be alone in their anti-EU crusade. Lega and

5 Star could also rally support among the new leftist Free and Equal group born

out of a scission in the Democrat Party to oppose former premier Matteo Renzi.

     "A Lega-5 Star cabinet would destroy market confidence, pushing the spread

between German and Italian bonds up, leading Italy to the verge of a sovereign

debt crisis like the one seen in 2011," warned LUISS's Fabbrini.

     --SECOND VOTE

     This is why such a potential cabinet could be rejected by head of state

Sergio Mattarella, who according to Italy's constitution, has the power to

formally appoint a new government, but only if capable of ensuring stability.

     Such a rejection however would just prolong party talks over other options,

causing a political stalemate and risk a second vote.

     Lega and 5 Star are both in full electoral campaign mode and deny the

possibilities of joining forces over fears of losing their own voters. But

neither has directly attacked the other on the hustings.

     "Let's see what happens after the vote: if we win the required 40% majority

to govern alone, we'll move on. If not, we'll appeal to other parties willing to

join forces with us," said Danilo Toninelli, 5 Star spokesman in the Lower

House.

     Five Star currently enjoy around 30% support in the polls. Lega is likely

to secure 15%-16%, but currently sits as part of a loose centre-right coalition

led by Silvio Berlusconi's Forza Italia party.

     "We are not demonising the 5 Star. Many citizens respect them. Our enemy is

the Democrat party and we will beat them," said Lega's Molteni.

     --KEY DIFFERENCES

     But there are key differences between Lega and 5 Star, who have different

positions on Europe and migrants, he argued.

     "They voted to downgrade the crime of illegal immigration and were in

favour of the Mare Nostrum EU-led naval mission to tackle incoming refugees. We

want to repatriate illegal migrants, they prefer to simply expel them," said

Molteni.

     Despite using a softer approach towards 5 Star than all other parties,

Molteni stressed that his group's "natural" position was within the

centre-right, but admitted that the goal was to beat also Berlusconi.

     Lega leader Matteo Salvini is running for premier in an "in-house

leadership race" against former premier Berlusconi to see who gets the most

votes to lead the next government in case of a centre-right win.

     Leadership tensions between Salvini and Berlusconi could also push the

former to switch sides in the elections' aftermath. Salvini is in favour of

breaching the 3% deficit-to-GDP threshold, while Berlusconi recently reassured

Brussels that European fiscal rules are sacrosanct.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com