By Gavin Jones
ROME (Reuters) - The prospect of an 81-year-old economist critical of Italy's euro zone membership becoming economy minister has brought fresh concern to Italian markets already rattled by the imminent formation of an anti-establishment government.
Italian bond yields rose on Tuesday as reports surfaced that Paolo Savona was the favoured candidate of the two parties trying to form a coalition: the far-right League and the anti-establishment 5-Star Movement.
League leader Matteo Salvini confirmed he wanted Savona in the key post, and said criticism of the budding coalition was driven by an attempt to prevent Savona's appointment.
Savona has distinguished academic and professional credentials and is in many ways a typical "establishment" figure, with high-level experience as a minister, at the Bank of Italy, at private banks and with employers' lobby Confindustria.
Many of his economic views are mainstream.
But the problem for markets and Italy's partners is his stance on the euro, which he has often described as a flawed project.
"Savona's background as a vocal critic of Europe's construction make him the least market-friendly candidate," Mizuho strategists told clients in a note.
In a book to be published this week Savona describes Italy's entry in the single currency as a "historic error" and calls for a "plan B" to be drawn up to allow it to leave the bloc with as little damage as possible if it should prove necessary.
That chimes with the stance of the League. Salvini's party wants to quit the euro, even though it says the political conditions to do so are not yet in place and its joint programme with 5-Star makes no reference to withdrawing.
5-Star's position is more moderate than the League's, though it is also hostile to the EU's current budget rules.
Savona says the euro was introduced prematurely, before the European Union was politically ready for it, but he is by no means a "sovereignist" hostile to European integration.
"He has a romantic, almost sentimental view of Europe, but he is convinced the way it is constructed at the moment is not helping its economy or its citizens," said Francesco Galietti, who heads political risk consultancy Policy Sonar and knows Savona personally.
President Sergio Mattarella, who has recently stressed the importance of Italy's commitments to the EU, is highly reluctant to accept Savona, a source close to Mattarella said.
Mattarella on Wednesday summoned the little-known academic Giuseppe Conte to his palace and is expected to name him prime minister. Conte, the joint candidate of 5-Star and the League, will than have to propose a cabinet team to the president.
Savona's appointment would likely alarm EU heavyweight Germany, in particular.
Savona says the euro zone's design is tailor-made for Germany, and warns in his latest book that the Germans are now trying to dominate Europe economically, having failed to achieve the goal militarily in World War II.
Mattarella has the final say on ministerial appointments, setting up a possible clash with the belligerent Salvini, who continues to push for his candidate.
ADVERTISEMENT"It seems someone in the list of ministers proposed by the League and 5-Star is not welcomed by the establishment, for example Paolo Savona," Salvini said on Facebook.
"He is an economist respected in the whole world ... but what has he done wrong? He has dared to say that the EU as it stands is not working properly."
(Reporting By Gavin Jones; Editing by Richard Balmforth)
