Asian shares steady; euro hampered by Italian political risk

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5-Star's parliamentary party leader Danilo Toninelli told state television Rai: "The only way to get a serious government is to return to the polls".

Mr. Mattarella said this month that if political leaders can't form a coalition, he will appoint a nonpartisan figure to lead a caretaker government and hold new elections by the end of the year.

But on Wednesday morning they issued a joint statement that harked back to the days of the 1980s and early 1990s when Italy's currency was the lira and before the EU's Maastricht treaty began to impose stringent fiscal standards on aspiring members of the euro.

In a direct challenge to European Union fiscal rules, the draft accord also wants the bloc to create fiscal headroom for spending by adjusting the formula used to calculate Italy's debt burden, which the rules say must be reduced.

Italy, one of six founding members of what became the European Union, has been stuck in a political quagmire since its inconclusive March 4 election, which was dominated by a struggling economy, the refugee crisis and illegal immigration. Now they say they will try and reform the European Union from within.

"I think the most likely thing is something along the lines of a political cataclysmic event like Brexit", Stiglitz said at the time.

Luigi Di Maio and Matteo Salvini have been working day and night to find a common way through their very different policy promises to the Italian electorate.

Italy's 10-year bond yield rose 0.06 percentage points in morning trading as investors retreated from the country's debt - yet they remained below pre-election levels, when a Five Star-League coalition was an unlikely scenario.

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The coalition could also fall out with Brussels over its plans for a clampdown on immigration and a call to cancel all economic sanctions on Russian Federation.

Though the markets are not panicking, the Euro lost ground against the USA dollar.

Berlusconi has refused to govern with the 5-Stars, who he regards as "more unsafe than communists".

The 5-Stars strongly appeal to voters in the south, where youth unemployment runs higher than 50 percent in many areas. However, three 5-Star sources said the main stumbling point remained who should head the administration.

Italy'srival populist leaders sought more time Monday to hash out a deal to govern together, with one side citing significant differences over how to stop the flood of migrants coming in and the other insisting his supporters have their say online before finalizing any coalition deal.

Forging a coalition would put the 5-Stars in Italy's national government for the first time. Among Mr. Di Maio's campaign planks was a pledge to guarantee a minimum income to the unemployed.

A leaked draft policy paper on the two parties' plans for government showed discussions about leaving the euro.

"A markedly Eurosceptic prime minister.as well as concrete support for the introduction of a parallel currency (so-called "Minibots"), would be major negatives, in our view", a note from Credit Suisse argued on Wednesday.

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