#Italy - new PM vows radical change, flanked by party bosses

Italy’s new prime minister promised on Tuesday (5 June) to bring radical change to the country, including more generous welfare and a crackdown on immigration, as the two party bosses who hold the keys to his anti-establishment government nodded their approval, write Steve Scherer and Gavin Jones.

“The truth is that we have created a radical change and we’re proud of it,” Conte said in his maiden speech to parliament, delivered in the upper house Senate, before winning a vote of confidence for his policy programme.

The government, backed by the 5-Star Movement, founded nine years ago as a grass-roots protest group, and the right-wing League, won the vote by 171-117 in the 320-seat Senate.

The coalition has a larger majority in the lower house, which was due to vote on Wednesday. It will then be fully empowered.

Conte, 53, spoke as 5-Star leader Luigi di Maio and League chief Matteo Salvini sat beside him, nodding their approval as the urbane law professor ticked off all the main elements of a policy agenda the party leaders had finalised days before.

Di Maio is labour and industry minister in Conte’s government and Salvini is interior minister. Their presence has raised doubts about whether Conte, a political novice, can put his own stamp on the government’s agenda.

In his 72-minute speech, Conte said priorities would include tackling social hardship through the introduction of a universal income - a 5-Star election promise - and to stem an influx of illegal immigrants, a pivotal policy of the League.

“We have to reiterate it - leaving the euro has never been considered and it is not being considered,” he said.

The ruling coalition’s original pick for economy minister, eurosceptic economist Paolo Savona, was vetoed by Italy’s president because of his critical views on the euro. He was replaced by a figure more reassuring for financial markets.

“The political forces that make up this government have been accused of being populist and anti-system...,” Conte said.

Conte is not affiliated to any party, though he is close to 5-Star, which presented him as a potential minister before the 4 March election. Di Maio and Salvini vetoed each other as prime minister and picked him as a compromise figure.

Touching on one of the most sensitive issues for markets, Conte said the eurozone’s fiscal rules should be “aimed at helping citizens” and Italy would negotiate changes to EU governance.

Italian government bonds sold off on his remarks, which confirmed much of the coalition’s budget-busting agenda. Italy’s 10-year government borrowing costs rose 18 basis points to 2.74% IT10YT=RR after hitting a one-week low of 2.509%  on Monday (4 June).

“The speech shows there are no signs that any of their proposals will be watered down,” said Antoine Bouvet, an interest-rates strategist with Japanese bank Mizuho.

However, Conte made no reference to one of the most costly of the coalition’s pledges: abolishing a 2011 pension reform that raised the retirement age.

In the debate after the speech, ex-premier Mario Monti said Italy risked being put under supervision of the European Central Bank, European Commission and International Monetary Fund unless the government carefully manages the public accounts.

Italy already has the biggest debt burden of major euro zone nations at about 130 percent of economic output. Economists estimate the coalition’s policy agenda would add tens of billions of euro to annual spending.

“We want to reduce the public debt, but we want to do it by increasing our wealth, not with austerity that, in recent years, has helped to make it grow,” Conte said. Debt was “fully sustainable today”, and key to reducing it was economic growth.

Conte stressed that “Europe is our home” and, despite the coalition’s plan to improve Russian ties, restated commitments to both NATO and Italy’s alliance with the United States.

On immigration, a major election issue after an influx of hundreds of thousands of mostly African asylum seekers, Conte said the government would end “the immigration business”.

“We are not and will never be racists. We want procedures that determine refugee status to be certain and speedy, in order to effectively guarantee their (refugee) rights,” he said.

League leader Salvini has pledged Italy will no longer be “Europe’s refugee camp”.

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