Italy’s populist parties were finally given the green light to form a coalition government on Thursday evening, after they backed down over their initial selection of a deeply eurosceptic economy minister.

After days of intensive negotiations and pressure from the markets, the anti-immigrant, hard-Right League party and the anti-establishment Five Star Movement agreed to a compromise.

Both parties had come close to forming a government at the weekend, only for their efforts to be torpedoed by President Sergio Mattarella, who refused to approve their controversial choice of Paolo Savona as economy minister.

Paolo Savona, 81, has called Italy’s adoption of the euro a “historic error”, describing the single currency as “a German cage” and calling for a “plan B” that would allow the country to exit the eurozone.

“An accord has been reached for a Five Star-League government with Giuseppe Conte as prime minister,” the parties said in a joint note on Thursday night, after dropping their insistence on Mr Savona's position.