Populists say coalition govt contract 'this evening'

Italy inched closer towards ending more than two months of political deadlock on Thursday as anti-establishment leader Luigi Di Maio revealed that a coalition government contract with the far-right would be finalised "this evening".

However the Five Star Movement head said that he and Matteo Salvini, the leader of the nationalist League, were still in talks over who would be their joint prime ministerial candidate.

"We'll close the contract this evening, we're waiting for contributions ... from some of our MPs and senators," Di Maio said as he left a summit at Italy's parliament on Thursday.

"We're still discussing the prime minister, it's not been decided yet."

Both Di Maio and the strongly eurosceptic Salvini have remained tight-lipped over who will be their PM candidate.

A Five Star source told AFP that there was not "an established time-frame" for a decision on their nominee, and Di Maio refused to comment on speculation that he and Salvini would present the contract and government team to President Sergio Mattarella on Monday.

Mattarella must agree to the parties' prime ministerial nominee before the candidate seeks the approval of parliament.

"We'll try to keep the Quirinal informed," Di Maio told reporters, referring to the presidential palace.

Approval

Di Maio said that the final version of the "Contract for the Government of Change" will be put to his party's members for approval "probably tomorrow".

The government team is expected to take into account the number of seats each party holds after March's inconclusive election.

Five Star became Italy's largest party after gaining nearly 33 percent of the vote, while the League -- shorn of the rest of the rightwing coalition that won 37 percent -- will be the junior partner with 17 percent.

Officials representing Mattarella have said he would only scrutinise the final version of the contract, which will be presented to him next week after two days of campaigning ahead of Sunday's regional elections.

A 40-page version of the document, from Tuesday evening, was leaked to daily Il Fatto Quotidiano on Wednesday night.

The contract contains a proposed "conciliation committee", a structure parallel to the parliament which would be responsible for settling any disagreements between two political forces that have diverging ideas on issues like immigration and Italy's relations with Europe.

Sanctions dropped

It proposes that European Union sanctions against Russia be dropped immediately, and includes a watered-down EU section that no longer talks about exiting the single currency but asks that unspecified "certain responsibilities" be repatriated to individual member states.

Domestically there are pension reforms, the introduction of a basic income and a section questioning 10 obligatory vaccines for children attending state schools.

The leaked version also contained a number of issues that still needed signing off, including possibly reopening discussions about EU rules and monetary policy.

Among other policies yet to be approved as of Tuesday evening were also whether asylum centres should "fully respect" migrants' human rights, and the radical proposal to have just two tax brackets -- 20 percent and 15 percent.

Also yet to be signed off were a register of religious leaders, a demand that all religious sermons be conducted in Italian, and that local consultations take place before any new mosques are opened.

The gap between Italy's and Germany's 10-year borrowing rates has increased by 25 base points since Tuesday to 156 -- a sign that investors were still concerned about Italy's financial stability.

The Italian stock market recovered with a one percent increase after taking a 2.32 percent hit on Wednesday.