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Both Di Maio, 31, and Salvini, 45, had claimed the right to become prime minister but with neither willing to compromise, they are expected to nominate a mutually acceptable neutral figure as the next prime minister.

There was speculation that the top job could be offered to Giulio Sapelli, an economist and university professor, or Giuseppe Conte, a law professor at Florence University. The anti-establishment, Eurosceptic parties are hoping to break two months of political deadlock that followed the general election, when Five Star won 33 per cent of the vote and The League, as part of a centre-Right coalition that has since unravelled, won 37 per cent.

If a coalition government is formed, the stage will be set for a showdown with Brussels for exceeding the three per cent budget deficit ceiling after the parties put forward a package of tax cuts and social welfare spending increases that could cost €104 billion.

Five Star wants to introduce a universal minimum income, costing some €17 billion a year. The League promises to cut taxes to a flat rate of 15 per cent, costing €60 billion.

They also want to scrap a 2011 pension reform and lower the age at which Italians can retire, costing around €15 billion. Finally, a further €12 billion would be needed to head off a rise in sales tax due next year.

"If implemented, it would be the biggest shake-up of the Italian economic system in modern times," Wolfgang Munchau, head of the Eurointelligence think tank, told Reuters.

Italy has the highest debt levels in the Eurozone, second only to Greece. The alliance would be a huge challenge to Brussels and will be the first time a founding member of the European project has elected a populist government.

Telegraph, London