Populist plans set Italy on a collision course with Brussels

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"It would be insane to give up at the moment of truth", League leader Matteo Salvini said in a live video stream on Facebook, adding that he would not be intimidated by negative reaction from financial markets or attacks from the media.

"I know Italians very well", Juncker said, noting that he grew up in a village with several Italian residents and used to play football with them.

"From Europe we have the umpteenth unacceptable interference by unelected officials", League leader Matteo Salvini said on Tuesday. The later draft states that Italy's position on the euro will be decided with its European partners, according to a version dated Tuesday evening and published by La Repubblica. The leaked document, however, contradicts their most recent public proclamations as it includes a plan to negotiate a massive debt write-off to the tune of €250 billion.

It's a slim possibility but one that can not be ruled out, especially after a leaked agreement between the two sides showed discussions have taken place about Italy abandoning the single currency.

This will now be something to watch as populism is back on the agenda for markets where the coalition has radical ideas to free up billions of euros for tax cuts and welfare.

They have both vowed to scrap an unpopular pension reform - a move that would punch a 15-billion-euro hole in state coffers.

"Italy were already fancied to be the next country to exit the European Union at 9/4 and recent coalition talks have only extended their lead at the front of the queue to 6/4".

The Turkish lira had been testing record lows against both the dollar and the euro but clawed higher after officials from the central bank said they would be prepared to act to halt the rout.

The Five Star Movement's Luigi Di Maio after talks at the presidential palace.

Brussels has called on the next Italian government, which is likely to be formed by Eurosceptic parties, to remain on the "European path" and not tear up the EU's strategy for controlling migration.

Immigration Commissioner said he hoped that Italy would not "change the line on migration policy". Speaking at the event, European Parliament President Antonio Tajani strongly warned Italy against exiting the euro.

North Korea's possible cancellation of a June 12 summit in Singapore added to geopolitical worries for financial markets, given it could see tensions on the Korean peninsula flare up again and damage US-China efforts to resolve an ongoing trade dispute. President Sergio Mattarella, who has repeatedly stressed the importance of maintaining a strong, pro-European stance, may also be dismayed.

Both groups have a history of euroscepticism. 5-Star has moderated its position considerably in the a year ago, rowing back on a previous plan to hold a referendum on Italy's membership of the currency bloc.

Hours after the document leak, 5-Star and the League issued a further joint statement saying they wanted to "reconsider" the euro zone's fiscal rules with Italy's partners "in the spirit of returning to the pre-Maastricht set-up" - a reference to the treaty which laid the groundwork for monetary union.

A 39-page document agreed to Wednesday night drops the writeoff demand but says that euro-area government bonds already purchased by the European Central Bank under quantitative easing should not count towards the debt-to-gross domestic product ratio, according to the Five Star official.

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