Northern League party leader Matteo Salvini. Photo: Reuters/Tony Gentile

After the appointment of finance minister Giovanni Tria, who is seen as a potentially moderating force in Italy’s new populist government, markets stabilized, despite concern about looming budgetary pitfalls.

But Italian government bond yields have climbed back the heights they reached when the left-wing Five Star movement and the right-wing League party took power. The two-headed mutant is reportedly pressing Tria to follow through on polices that the parties campaigned on, including a flat tax, guaranteed basic income, and a reversal of earlier austerity reforms.

“The autumn budget will not immediately include everything in our program but the first steps towards flat tax, the dismantling of the […] pensions reform, getting rid of letters from [the state debt collector], these elements will be present,” Matteo Salvini, deputy prime minister and League party chief said in an interview on Sky TG24, as quoted by The Financial Times.

The yield on Italy’s two-year bond was up 40 basis points on Friday, after rising 17 bps a day earlier.

Italian banks were the worst performers among European lenders.