2018.05.2820:33:00UTC+00Markets Take Hit as Cottarelli Receives Mandate to Establish Italian Government

Investors sold off Italian bonds and stocks on Monday as President Sergio Mattarella attempted to resolve political and market tensions by asking former IMF official Carlo Cottarelli to form a technocratic government.

The political crisis in the country escalated after Mattarella was frustrated by efforts by two populist parties to establish a coalition.

The Italian leader attempted to deliver an assuring message to markets, despite him being widely considered to secure a vote of confidence, which would promote fresh elections by the autumn.

Mattarella asked Cottarelli to be the country's prime minister and establish a technocratic cabinet after summoning him in central Rome on Monday, as a new sell-off impact Italian bonds and equities.

In a short statement, the mandate was accepted by Cottarelli, pledging to turn up a list of ministers immediately and attempted to deliver a message to assure markets. He said that the Italian economy is still expanding and public finances are under management. He added that talks with the EU to defend their interests are important.

Cottarelli's appointment came as the nation was plunged into political chaos, after the collapse of plans by anti-establishment Five Star Movement and the far-right League which secured most votes during an election in early March to establish a coalition government.

Italian financial markets saw heavy selling on Monday amid the political turmoil. The nation's debt yields rose to levels not observed since the wake of the eurozone debt crisis. The FTSE MIB Index, Italy's top stock barometer, trimmed a 2 percent advantage, to trade lower by 1.5 percent in midday trading in Milan.