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"Today we were prevented from forming a government", Five Star Movement chief Luigi Di Maio told his followers in an angry video on Facebook, calling Mattarella's stance "incomprehensible" and accusing "ratings agencies and banking lobbies" of undue influence over Italian politics.

"Steady nerves and solidarity for President Mattarella", Gentiloni said via Twitter after premier designate Giuseppe Conte dropped his bid to form a 5-Star Movement/League government following President Mattarella's rejection of Savona.

Italy's novice premier-designate Giuseppe Conte struggled to form a populist government throughout the weekend, stranded between a president who objects to a eurosceptic candidate for the economy ministry and a coalition ally threatening to force early elections.

European stock markets and the euro breathed a sigh of relief Monday after Italy's president vetoed the nomination of a fiercely eurosceptic economy minister, averting a potential eurozone crisis, analysts said. "We'll see if we can start a discussion on the electoral law in parliament".

Mr Salvini told reporters: "I ask myself, are we a democracy?"

On Saturday, the far-right League party and the anti-establishment 5-Star Movement stuck by Savona, challenging Mattarella to accept him or risk another election later this year. In debt markets, the Italian 10-year sovereign yield dropped 10 basis points showing that investors actually saw government bonds as being more appealing with populist parties failing to win their demands.

"I expended the maximum effort to carry out this task", Conte said in brief televised comments after meeting with Mattarella.

Mr Cottarelli, 64, worked at the International Monetary Fund from 2008 to 2013, gaining the nickname "Mr Scissors" for making cuts to public spending in Italy. Several commentators were quick to suggest that Conte had been chosen simply because he would do the bidding of the two party leaders who would in turn hold key cabinet posts.

The 5-Stars and the League together command just over half the lawmakers' seats. Siri said that the flat tax was expected to jump-start the Italian economy with projected GDP growth of 3 per cent in the first year.

A livid Di Maio later called for the president to be impeached.

The prospect of a populist government running Italy had already caused turmoil in financial markets, over fear that the coalition would unleash a spending splurge and increase Italy's massive debt mountain - the equivalent of more than 1.3 times the nation's domestic output.

Under that article, the president would be voted on "for high treason or attacking the constitution" by all members of parliament.

President Donald Trump said Sunday that representatives from the US had arrived in North Korea over the weekend, in an effort to prepare for a proposed summit between him and North Korean leader Kim Jong Un.