The populist Movimento Cinque Stelle (M5S) and right-wing Lega agree a government ‘contract’, but who will head the new executive remains unclear.

The populist Movimento Cinque Stelle (M5S) and right-wing Lega have said they have reached agreement on a ‘contract’ setting out their joint programme after heated government-formation talks lasting several days.

However, the two parties that emerged victorious from elections on 4 March but without taking enough seats to govern on their own have still not reached a consensus on who might lead the joint executive, with M5S leader Luigi Di Maio and Lega leader Matteo Salvini both wanting power.

Indeed, one possibility apparently under serious consideration is that they alternate in the role of prime minister.

Salvini has also said he wants a representative of his anti-immigrant party to head up the ministry of the interior on grounds it is best placed to defend Italy’s southern borders.

The announced contract agreement comes after President Sergio Mattarella lost patience with lack of progress in forming a political executive and said the country should either give itself a government of technocrats or vote again.

Di Maio and Salvini both rejected the proposal, but were only able to resume government-formation talks after the Lega’s centre-right coalition partner Forza Italia led by Silvio Berlusconi gave its blessing to a pact between the two.

Previously Berlusconi had ruled out the possibility of an agreement involving M5S and Lega that did not also include the latter’s coalition allies, while Di Maio insisted his party would never govern with Forza Italia while it was still headed by Berlusconi. A court in Milan ruled last week that the 81-year-old Berlusconi should now be allowed to stand for public office again. He was debarred after he was found guilty of tax fraud in 2012. He has now been given time off his sentence for “good conduct”.

Mattarella has given M5S and Lega until Sunday to present a definitive joint government programme and list of ministers.

Should these pass scrutiny the head of state would officially nominate the prime minister and ministers, who would then be sworn in and appear before parliament for the vote of confidence needed to govern.

European institutions have been watching political developments in Italy with some concern amid fears that a populist and Eurosceptic government might deal a fatal blow to the Union, which has already been significantly weakened by Brexit, failure to respond effectively to migration and the rise of right-wing populism, nationalism and xenophobia in other member states.

They have also warned of the need for the new Italian government to respect EU fiscal rules on deficit and debt.

By Laura Clarke