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FILE PHOTO: Italian Economy Minister Giovanni Tria attends his first session of the Lower House of the Parliament in Rome, Italy, June 6, 2018. REUTERS/Tony Gentile/File Photo(reuters_tickers)
By Giuseppe Fonte
ROME (Reuters) - Italy's coalition government, facing market turbulence over reports of internal divisions, finally agreed on Friday who should fill two key positions which carry great influence over the economy.
The deal will see Fabrizio Palermo become CEO of powerful state lender Cassa Depositi e Prestiti (CDP) while seasoned civil servant Alessandro Rivera will take on the role of director-general of the Treasury, political sources said.
The coalition partners -- the anti-establishment 5-Star Movement and far-right League -- had been at loggerheads with Economy Minister Giovanni Tria over the sensitive appointments and all previous efforts to reach a compromise had floundered.
Tria is an economics professor with no political affiliation. He has constantly sought to reassure investors that the government will keep finances under control, despite big spending pledges included in the coalition pact.
Italian newspapers said on Friday 5-Star leader Luigi Di Maio had demanded Tria's resignation unless he backed down -- reports that pushed government bond yields higher on fears of political instability in the eurozone's third largest economy.
Di Maio denied the reports, but with markets roiled, Prime Minister Giuseppe Conte chaired a previously unannounced meeting at which Di Maio and Tria agreed to a compromise, sources said.
While Tria got his way over Rivera, the 5-Star won out with Palermo, source said.
Rivera is head of the Treasury's financial sector policy and legal affairs department. A political source said 5-Star had been opposed to his promotion, seeing him as an insider who would be resistant to the sort of change they want to bring to bear on Italy's lacklustre economy.
By contrast, Tria had pushed to make the vice president of the European Investment Bank, Dario Scannapieco, head of the CDP. 5-Star instead wanted to promote Palermo, who is the current chief financial officer of CDP.
Official confirmations of the two nominations are expected to come next week.
CDP traditionally plays a vital role in Italian corporate politics and is often called in when national strategic interests are deemed to be at stake.
One of the first tasks awaiting the new management could be a decision on whether to prop up ailing national airline Alitalia, [CAITLA.UL] with politicians from both 5-Star and the League suggesting the CDP could ride to the carrier's rescue.
Despite Friday's deal, relations between Tria and the coalition parties will remain under close scrutiny.
A 5-Star source said the party was concerned that Tria was not listening to his coalition partners.
"We are a bit worried because Tria is part of a political coalition government, but he seems to want to decide things on his own," the source said.
(Additional reporting by Gavin Jones and Luca Trogni; Writing by Crispian Balmer; Editing by Gareth Jones)