Italian far-right’s bid to seize power has collapsed with the appointment of a more moderate, pro-Europe government.

Italy’s new coalition government will be sworn in on Thursday, drawing a line under a crisis sparked by the country’s power-hungry far-right.

Giuseppe Conte, who returns as prime minister, presented his more moderate and pro-European cabinet after hammering out a deal between former foes from the anti-establishment Five Star Movement and the centre-left Democratic Party.

He said the new government would work with “intense passion” to revive spirits in Italy, a nation plagued with high debt, high unemployment, and widespread dissatisfaction over immigration and the country’s relations with Brussels.

Cabinet members will take the oath at 10am [0800GMT], ushering in a new political era after the collapse of the populist coalition last month.

Luigi Di Maio, head of the Five Star Movement, will be foreign minister while the Democrats’ Roberto Gualtieri has been given the finance portfolio in the Eurozone’s third-largest economy.

At just 33 years old, Di Maio will be the youngest foreign minister in Italy’s 158-year history.

The 21-member cabinet will also include seven women.

Salvini’s gamble fails

Gualtieri, who has chaired the European Parliament’s committee on economic and monetary affairs for the past five years, will have to move fast to deal with Italy’s most pressing issue – the upcoming budget.

The Five Stars and Democrats agreed to put aside their differences to prevent the country heading to the polls after far-right figurehead Matteo Salvini, leader of the populist League movement, collapsed the former coalition government while MPs were mostly at the beach.

Salvini was riding a wave of popularity after his hard-line measures against migrants and humanitarian vessels saving lives in the Mediterranean. In his final weeks as interior minister, Salvini’s party pushed through new legislation that criminalised rescue workers, leaving crews vulnerable to $1.1 million fines and having their ships impounded.

Gambling that new elections would see him seize power for the far-right in Italy, Salvini announced his party could no longer work with the Five Star Movement, plunging the country into a summer crisis.

But the gamble has not paid off and Salvini now finds himself frozen out of the government entirely.

Challenges

The road to a deal has been rocky, with bickering over posts and the government’s agenda, and political observers have warned that the nascent coalition may not run its full course to 2023.

Italy is notorious for rapid political turnover: Conte’s new government will be the 67th in just 73 years.

“Governing will be trickier than agreeing a coalition,” Berenberg economist Florian Hense said in a note.

“The upstart Five Stars have been the bane of the established PD for the past six years. Conte’s ability to broker compromises between the parties will be even more crucial than it was for his previous coalition,” he said.

The government’s first challenge will be submitting the 2020 budget to parliament by the end of September, and then to Brussels by October 15.

It will need to find more than 20 billion euros ($22bn) in savings to comply with EU rules and avoid a rise in VAT, which would hit the country’s poorest the hardest and could see debt-laden Italy slide back into recession, as is also feared in Germany and the United Kingdom.

The outgoing government quarrelled bitterly with the European Commission over its big-spending plans, but analysts said the new tie-up was expected to strike a more conciliatory tone and may therefore win some flexibility.

Hense handed the new team faint praise, saying it was “unlikely to implement the serious pro-growth structural reforms that Italy needs in the long run”.

“But it probably will not make the situation worse,” said the economist.