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Luigi Di Maio, Leader of 5-Star Movement (M5S) leaves the parliament after a new day of meetings for the formation of the new government on April 26, 2018 in Rome, Italy.

Antonio Masiello | Getty Images

Luigi Di Maio, Leader of 5-Star Movement (M5S) leaves the parliament after a new day of meetings for the formation of the new government on April 26, 2018 in Rome, Italy.

Italy’s Deputy Prime Minister Luigi Di Maio, told CNBC his country will not change course despite fears of ballooning debt and struggling growth.

Last week, Italy’s anti-austerity government cut its 2019 growth forecast to 0.2% from a previous forecast of 1%.

The country also raised its 2019 deficit to 2.4%, breaking a commitment given to the European Commission last year to stick to just over 2%. The government also predicted public debt would hit a fresh record high of 132.6% of gross domestic product (GDP).

After the announcement, the European Commissioner for Economic and Financial affairs, Pierre Moscovici, said “We could again have problems with Italy.”

Speaking to CNBC’s Dan Murphy in Dubai on Monday, Di Maio said he still had faith in his government’s plan to reject austerity measures preferred by lawmakers in Brussels.

“We are not going to change path.We are on this path for growth and we want to further improve Italian production compared to the the past,” he said.

The 32-year-old said Italy’s attempts to improve its economy had to be looked at in the context of the ongoing trade dispute between the United States and China as well as Britain’s drawn out exit from the European Union.

“When we forecasted 1% GDP growth, Germany forecasted to grow by 1.9%, now Germany is fighting to achieve 0.5% growth. So our targets are positive, compared to other European nations. We are not resigned to zero percent growth and we are passing a series of laws to boost growth in Italy,” he said.

The deputy prime minister added that while there had been some losses in value to Italian banks at the end of 2018, the volatility in markets had passed and he didn’t think there was a risk for Italian lenders at the moment.

“We are a country of savers, we have a lot of private savings and this is very important for our economy. So, in general, I don’t see any risk for the Italian banks, for the euro zone, and for Europe.”

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Austria chancellor calls for snap election after far-right leader resigns



Sebastian Kurz, Austrian Foreign Minister and leader of the conservative Austrian Peo

Thomas Kronsteiner | Getty Images

Conservative Austrian Chancellor Sebastian Kurz pulled the plug Saturday on his coalition with the far-right Freedom Party, after the party’s leader quit as vice chancellor over video showing him discussing state contracts in return for favors from a woman posing as a Russian oligarch’s niece.

“Enough is enough,” Kurz said in a statement to the media, listing several lesser scandals involving the Freedom Party that did not cause their coalition to collapse. He said he would propose to Austrian President Alexander Van der Bellen that a snap election be held as soon as possible.

The Freedom Party, one of a number of anti-immigrant nationalist parties to have scored electoral success in Europe in recent years, has been the junior partner in Kurz’s coalition for 18 months.

Heinz-Christian Strache said earlier Saturday he was stepping down from his posts as vice-chancellor and Freedom Party chief over the video, but he denied breaking any laws.

The video, released a week before European parliament elections in which nationalist groups allied to Strache’s party are expected to perform well across the continent, showed Strache meeting the woman in 2017, shortly before the election that brought him into government.

Strache, whose party has a cooperation agreement with Russia’s ruling United Russia party, described the sting as a “targeted political assassination” and said it never led to any money changing hands. He insisted the only crime that took place was illegally videotaping a private dinner party.

In the footage, he appears to offer to funnel contracts towards a company in exchange for political and financial support. He discussed rules on party financing and how to work around them, although he also insisted on having to act legally.

“It was dumb, it was irresponsible and it was a mistake,” Strache told a news conference, fighting back tears as he asked his wife and others to forgive him.

“In the cold light of day, my remarks were catastrophic and exceedingly embarrassing,” he said. In an at-times rambling defense of his behavior, Strache also apologized for flirting with the woman, whom he describes as attractive in the recording.

“It was typical alcohol-fueled macho behavior in which, yes, I also wanted to impress the attractive female host and I behaved like a bragging teenager,” he said.

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Australia’s conservative government on course for ‘miracle’ election victory



Australia’s Liberal-led conservative government was headed for a remarkable win at the national election early on Sunday after uncovering a narrow path to victory that twisted through urban fringes and rural townships.

The results upended pre-election polls which predicted a Labor victory, though it is unclear whether the Scott Morrison-led coalition can govern with an outright majority or will need to negotiate support from independents.

The final result may not be known for some time.

“I have always believed in miracles,” Morrison told cheering supporters at Sydney’s Wentworth Hotel, where the government holds its official election night function.

“Tonight is not about me or it’s not about even the Liberal party. Tonight is about every single Australian who depends on their government to put them first.”

The conservative government has won or is leading in 72 seats in its quest for a 76-seat majority, according to the Australian Electoral Commission, with just over two-thirds of votes counted.

Several seats are still too close to call and the final result is complicated by a large number of early votes that have delayed counting.

Morrison’s coalition defied expectations by holding onto a string of outer suburban seats in areas where demographics closest resemble America’s Rust Belt, blocking Labor’s path to victory.

This included a devastating result in the coal-rich state of Queensland, which backed the Pentecostal church-going prime minister by defying expectations and delivering several marginal seats to his government.

Sombre defeat

Voters on Saturday cast their ballots for Morrison’s message of support to aspirational voters and turned their back on Labor leader Bill Shorten’s reforms.

“I know that you’re all hurting and I am too,” Shorten told supporters at the party’s Melbourne election night function.

“And without wanting to hold out any false hope, while there are still millions of votes to count and important seats yet to be finalised, it is obvious that Labor will not be able to form the next government.”

Shorten said he would step down as the party’s leader.

Labor, a party with deep ties to the union movement, had promised to abolish several property and share investment tax concessions primarily aimed at the wealthy.

Both major parties suffered a decline in their primary vote, according to AEC data, which was caused in part by a well-funded campaign by Clive Palmer’s populist United Australia Party.

The election sparked several high-profile local battles, including attempts to remove Peter Dutton, a senior lawmaker who has championed Australia’s controversial policy of detaining asylum seekers in offshore centres.

Although Dutton has retained his Queensland seat, former conservative prime minister Tony Abbott lost his Sydney beaches seat of Warringah to high-profile independent Zali Steggall.

“So, of course, it’s disappointing for us here in Warringah, but what matters is what’s best for the country,” Abbott told supporters in a concession speech.

“And what’s best for the country is not so much who wins or loses Warringah, but who forms, or does not form, a government in Canberra.”

There were also 40 of 76 Senate spots contested in the election, the outcome of which will determine how difficult it will be for the next government to enact policy.

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Trump aims to cool Mideast tensions, but Iran likely not ready to talk



US President Donald Trump (L) greets Switzerland’s President Ueli Maurer before a meeting at the White House on May 16, 2019, in Washington, DC.

Brendan Smialowski | AFP | Getty Images

President Donald Trump appears to be paving the way for negotiations with Iran as tensions in the Middle East steadily escalate and send oil prices higher this week.

However, energy industry watchers and experts in the region believe the Iranian leadership in Tehran is not ready for talks. They say the Islamic Republic will first seek to strengthen its hand after the Trump administration tightened sanctions on the nation’s lifeblood, oil exports, and designated the Iranian Revolutionary Guard Corps a terrorist group.

That leaves room for miscalculations that could keep the oil market on edge. Tehran and Washington have already misread one another’s actions, leading to a dangerous series of counter measures between the adversaries, the Wall Street Journal reported on Thursday.

If we’re going to persist down the policy course we’re on, which is essentially to eviscerate the Iranian economy, even if we say we want to talk, are they going to listen to us unless we sweeten the offer?

Helima Croft

RBC Capital Markets global head of commodity strategy

Trump on Thursday met with Swiss President Ueli Maurer, whose nation has facilitated communication between the U.S. and Iran since they broke diplomatic ties in 1979. A day earlier, Secretary of State Mike Pompeo phoned Sultan Qaboos bin Said of Oman, another long-time intermediary between the U.S. and Iran.

That outreach, along with Trump’s recent remarks that he wants Iran to call him, are fueling speculation that Washington is seeking a diplomatic path after a series of troubling escalations in the Middle East.

This week alone, four vessels were allegedly sabotaged in a strategic oil port off the coast of the United Arab Emirates. Iran-aligned Houthi rebels in Yemen also claimed responsibility for drone attacks on Saudi oil infrastructure, prompting retaliatory airstrikes by Saudi Arabia on Houthi positions in Yemen.

Meanwhile, Washington has expedited the deployment of warships and bombers to the Middle East and pulled diplomatic staff from Iraq in response to intelligence suggesting Iran is planning attacks on U.S. positions in the region. The posturing has raised concerns that hawks within the White House are setting the stage for military conflict.

But a day before his meeting with the Swiss president, Trump reportedly told acting Defense Secretary Patrick Shanahan that he does not want to go to war with Iran. On Friday, Trump took to Twitter to denounce the “Fake News Media” for “fraudulent and highly inaccurate coverage of Iran.”

“I think they’re trying to walk it back a bit,” said John Kilduff, founding partner at energy hedge fund Again Capital. “I don’t think Trump wants a war. I think he thinks it would hurt his reelection efforts.”

Oil prices have risen about 2% this week on Middle East tensions. If the rhetoric from Washington cools, oil prices could pull back at least $2 a barrel, Kilduff said.

Risk consultancy Eurasia Group believes Trump is serious when he says he wants Iran to call him to negotiate.

“Trump is supremely confident in his negotiating abilities and believes he can strike deals that no other president can. He wants to repeat with [Iranian President] Hassan Rouhani what he did with Kim Jong Un,” Eurasia Group analysts Henry Rome and Jeffrey Wright said in a research note.

Rome and Wright say the Iranian foreign minister’s offer last month to negotiate a prisoner swap may have opened the door for this week’s meeting with the Swiss. But following increased U.S. pressure, Tehran is now likely to focus on building leverage against Washington before agreeing to talks.

That includes by continuing to scale up its nuclear program. Iran is restarting some nuclear activity it previously agreed to suspend under a 2015 accord with world powers. Trump pulled the U.S. out of the deal last May and restored wide-ranging economic sanctions on Iran, setting in motion a year of steadily escalating tension with the Islamic Republic.

The U.S. sanctions are seen by Tehran as economic warfare aimed at regime change, and that presents an obstacle to coaxing Iran to the negotiating table, says Helima Croft, global head of commodity strategy at RBC Capital Markets.

“If we’re going to persist down the policy course we’re on, which is essentially to eviscerate the Iranian economy, even if we say we want to talk, are they going to listen to us unless we sweeten the offer?” she said.

She added, “It doesn’t look at this point like we’re really incentivizing them to sit down with us.”

In order to reach a diplomatic breakthrough, Croft believes the Trump administration likely needs to revisit a list of 12 demands it placed on Iran last year. Those include stopping ballistic missile tests, accepting a tougher nuclear deal and ending support for U.S.-designated terror groups.

That could mean challenging hardliners, particularly National Security Advisor John Bolton, the official behind many of the recent U.S. escalations in recent weeks.

Trump has reportedly grown frustrated with Bolton over his role in increasing tension in the Middle East, but the president also tried to tamp down reports of conflict in the Oval Office. On Twitter, he called reports of “infighting with respect to my strong policy in the Middle East” fake news.

Eurasia Group’s Rome and Wright say there’s merit to those reports.

“Trump likely views Bolton as trying to box him in and limit options to avert violent confrontation,” they said. “While Bolton’s job is not likely in danger, the disagreements between the two men on this issue are significant and real.”

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