PM-designate puts technocrat government formation on hold to allow for possible compromise by populist parties.

Italy’s designate-Prime Minister Carlo Cottarelli has put on hold the formation of a technocrat government as “new possibilities” reportedly emerged for agreement on an elected coalition.

Cottarelli raised hopes of a solution to Italy’s political crisis on Wednesday, with comments that suggested a political compromise might still be possible.

Cottarelli, who is a former International Monetary Fund (IMF) official, had been tasked by President Sergio Mattarella on Monday to form a caretaker government and plan renewed elections, a day after an attempt for a government by populist parties Five Star Movement and the League broke down.

Their pick for prime minister, Giuseppe Conte, abandoned his mandate to form a government on Sunday after Mattarella refused to allow Paolo Savona, an outspoken critic of the EU, to take up the post of minister of economy.

On Wednesday, Italian news agency ANSA quoted sources close to Cottarelli who said he would wait for possible developments before pressing ahead with the formation of an interim government.

“During his work as premier-designate for the formation of a new government, new possibilities emerged for the creation of a political government,” the sources told ANSA.

“Faced with the tension on the markets, this circumstance induced him – in agreement with the president – to await eventual developments.”

Five Star Movement leader Luigi Di Maio appeared willing to return to the negotiation table on Tuesday night, walking back his call for the impeachment of Mattarella as well.

“We’re ready to reconsider our position in the sense that if we made a mistake – something I doubt – we’ll say so, but now we should respect the will of the people,” news agency AP quoted him as saying.

On Wednesday afternoon, Di Maio met informally with Mattarella followed by Cottarelli.

But leader of far-right party, the League, Matteo Salvini, said Italy should have elections as soon as possible.

“The earlier we vote, the better, because it’s the best way to get out of this quagmire and confusion,” Reuters quoted him as saying.

An opinion poll published on Wednesday showed that support for the League had jumped up eight percentage points to 25.4 percent. Five Star League remained steady at around 32.6 percent.

Italy has been without a government for nearly three months after the March elections came out inconclusive.

The prospect of renewed elections has shaken financial markets with the value of the euro against the dollar hitting a 10-month low on Tuesday.