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Italian bonds slide as 'barbarian' populists near coalition deal

Italian bond yields jumped to the highest levels in at least four months as populist parties neared a coalition deal, and the leader of the far-right League hit back at criticism of his economic plans, declaring that it was better "to be a barbarian than a slave."

The yield on benchmark 10-year Italian government bonds jumped 13 basis points to 2.080% at 9:52 a.m. ET, the steepest rate since January, as the League's Matteo Salvini said he could clinch an agreement with the populist Five Star Movement later on May 16. The FTSE MIB stock index slid 2%.

Referring to a Financial Times article labeling the two parties "the modern barbarians" in which the paper raised doubts about policies including a €780 monthly basic income for the poor, slashing income tax to a maximum as low as 15% and a reversal of some pension reforms, Salvini said: "Better to be a barbarian than a slave who sells the dignity of Italy, its future, its businesses, and even its borders."

The parties earlier said a draft coalition agreement leaked to HuffPost indicating that the parties were seeking "specific technical procedures" for leaving the euro was out of date. Their plans now call for remaining in the single European currency area, they said.

Other proposals contained in the draft, which would likely cause tension with Italy's European Union partners and violate the bloc's fiscal rules, include calling for the European Central Bank to cancel €250 billion in Italian debt acquired under its quantitative easing program. The League also wants to deport 500,000 illegal immigrants in five years.

A deal between Five Star and the League would end a political gridlock following an inconclusive election in March.