Italy's president calls in former International Monetary Fund official amid political turmoil

Italian President Sergio Mattarella

His attempts to form a government broke down when Mattarella refused to allow Paolo Savona, an outspoken critic of the European Union, to take up the post of minister of economy.

Shortly afterwards, the president's office summoned Mr Cottarelli, the IMF's former director of fiscal affairs, for a meeting on Monday.

European stock markets and the euro breathed a sigh of relief Monday after Italy's president vetoed the nomination of a fiercely eurosceptic economy minister, averting a potential eurozone crisis, analysts said.

The agreement to form a populist coalition came after weeks of fruitless negotiations following the results of the March 4 elections, which did not give any party an outright majority.

Mattarella said he has done "everything possible" to aid the formation of a government, but that an openly eurosceptic economy minister ran against the parties' joint promise to simply "change Europe for the better from an Italian point of view".

Financial markets tumbled last week on fears the coalition being discussed - a marriage of the far-right League and the populist 5-Star Movement - would unleash a spending splurge and dangerously ramp up Italy's already huge debt, which is equivalent to more than 1.3 times the nation's domestic output.

Mattarella told reporters that it's important for confidence in broader financial markets that Italy signals its intentions to remain part of the euro.

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On Friday, ratings agency Moody's threatened to downgrade Italy's debt rating, citing a risk the a populist-led government might fail to reduce its public debt. "The main risk is that the stand-off will further embolden the 5-Star, and especially the League".

Separately, right-wing leader Matteo Salvini indicated in remarks to supporters Sunday that he had refused to submit to a presidential veto of his choice of a euroskeptic economy minister. "Tomorrow we want to know the date of the election", Salvini said on Sunday during a live stream on his Facebook page.

For anyone wondering how the Italian president, usually seen as acting as a figurehead, was able to veto a minister backed by most parliamentarians, here's an explainer of how much power the president has in these situations. "It's madness", said League chief Matteo Salvini, vowing to "bring democracy back to this country".

Amidst the outrage, the leader of the largely collapsed Democratic Party (PD), Maurizio Martina, voiced his support for Mattarella, saying that his party-widely understood to represent the establishment-was ready "to mobilize a defense of democracy and our institutions" if attacks on the Italian president persist. However, previous presidents have also challenged individual ministers. Italian heads of state have made bold moves in the past.

President Sergio Mattarella turned to the former International Monetary Fund official to run a technocratic government until an early election can be held. His likely appointment of an EU-conformist, technocrat government in its place will be a red rag to a populist bull.

Berlusconi denounced what he said was a state coup and demanded early elections - but in vain.

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