Populist coalition government back on the cards in Italy as Five Star and League party leaders stage fresh talks

Coalition deal appears back on as support for League surges - yet support for the euro high too

The League leader Matteo Salvini at a campaign rally yesterday for local elections - which could now be off (AP)

Italy appears to be back on course towards being run by a new populist government comprising two parties with contrasting ideologies after their leaders agreed to a last-ditch effort to revive talks.

Matteo Salvini, the head of the League party, and Luigi Di Maio, of the Five Star Movement, will meet early tomorrow afternoon, a Five Star source said.

The country’s future has been on a knife edge for days, since earlier talks collapsed when President Sergio Mattarella rejected the parties’ candidate for finance minister – 81-year-old Paolo Savona, who opposes membership of the euro.

The failure of the first effort to form a coalition government by Italy’s two largest anti-establishment forces raised the prospect of snap elections focused on membership of the single currency.

New opinion polls show that up to three quarters (60-72 per cent) of Italians want the country to remain in the euro, while 23-24 per cent favour dropping it. The polls were taken by the Euromedia and Piepoli organisations for Rai state television.

Other surveys suggest the Eurosceptic, anti-immigration League and the anti-establishment Five Star movement would win an election together outright.

Support for the League is up 8 percentage points to 25.4 per cent on its support in the March elections, an Ipsos poll yesterday in the Corriere della Sera newspaper found. It also showed support for the Five Star Movement, co-founded by comedian Beppe Grillo, holding steady at about 32.6 per cent.

Other polling results on Monday showed the League jumping 10 points to 27.5 per cent and the Five Star falling about 3 points to 29.5 per cent.

In both cases, the two would have a majority in parliament if they joined forces as they did after the March election, which led to Five Star becoming the largest single party but was inconclusive in the end.

Mr Salvini cancelled scheduled appointments to fly to Rome and was expected to have a private meeting with Mr Di Maio, a political source said.

And Giuseppe Conte, the little-known lawyer who had originally been lined up as prime minister of a coalition of the Five Star and League, reportedly cancelled a University of Florence lecture to head to Rome.

Mr Di Maio, who has been enthusiastic about reaching a deal, had urged Mr Salvini to drop his insistence on Mr Savona for the economy portfolio and to give him a different post in the next government.

Mr Salvini had said he was not closing the doors to a solution but showed some resistance to the change, saying: “If someone in Berlin or Paris wakes up in a bad mood, that doesn’t mean that an Italian minister gets kicked out.”

Mr Mattarella had appointed a former International Monetary Fund official, Carlo Cottarelli, to form a stopgap government of experts to lead the country to snap elections, but Mr Cottarelli failed to form a viable cabinet.

Italian stocks were trading higher as signs emerged of a compromise to avoid snap elections, calming investors.

Lupo Rattazzi, a prominent Italian businessman, took out a full-page advertisement in several national newspapers addressed to Mr Salvini and Mr Di Maio, warning of the dire consequences of leaving the euro.