By Eric J. Lyman
ROME, May 27 (Xinhua) -- Giuseppe Conte's decision to abandon his bid to become Italy's next prime minister dashed the first chance for two political novices to take the helm of Europe's fourth largest economy and could pave the way for new elections later this year.
Conte, 53, clashed with Italian President Sergio Mattarella over the selection of 82-year-old euro-skeptic economist Paolo Savona.
Mattarella said he feared Savona would "probably or almost certainly bring Italy's exit from the euro currency zone", something most Italians oppose.
Luigi Di Maio, 31, leader of the populist Five-Star Movement, and 45-year-old Matteo Salvini of the nationalist League -- both newcomers to national politics in Italy and leaders of the coalition that nominated Conte -- refused to back down on Savona. That forced Conte, another political neophyte, to resign his mandate.
Financial markets had been nervous about the prospects of Savona as the chief of Italy's economy. Italian stocks so far lost more than 8 percent of its value this month, while yields on Italian bonds, a measure of investor jitters about a country's economic prospects, shot up.
According to ABS Securities analyst Gian Franco Gallo, investor nervousness will probably calm when markets open Monday.
"The big fear was that Italy might leave the euro currency union or otherwise act to weaken the ties between European Union states," Gallo said in an interview.
"That risk is now greatly reduced. I think what happened was Mattarella drawing a red line and saying 'We will not go beyond this and put the euro currency union at risk'."
The Italian media reported that following Conte's departure, Mattarella asked economist Carlo Cottarelli to come to his office Monday morning.
Gallo said that would likely mean Cottarelli, a former director for the International Monetary Fund, will be asked to form a caretaker government that could have the mandate of finalizing the country's 2019 budget and perhaps a political reform before new elections in September or October.
The Five-Star Movement and the League both finished with record high vote totals in the March 4 general election, pollsters said it was unclear whether the 12-week standoff that resulted in an aborted attempt to form a government under Conte might impact the performance of the two parties if new elections are held within a few months.
"Both parties seem to have maintained their support levels for the most part and the absence of a strong opposition will no doubt help," Maria Rossi, co-director of polling firm Opinioni said in an e-mail after the latest moves. "But it is difficult to know how the coming months might play out."
One wildcard factor is Silvio Berlusconi, the controversial billionaire tycoon and former prime minister whose party, Forza Italia, finished fourth in May, behind both the Five-Star Movement and the League with 14 percent of the vote.
But that happened while Berlusconi was banned from holding public office because of legal problems. That ban was lifted since the election, and that could allow Berlusconi to do better in a future vote.
The center-left Democratic Party, meanwhile, a distant second to the Five-Star Movement in the March 4 vote, is having internal problems and might risk splitting into factions before a new vote can be held.