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January 12, 2021

Europe

ITALY: Simmering tensions come to boil

BY Wolfango Piccoli

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A cabinet meeting widely seen as setting the stage for a showdown in Italy’s simmering government crisis will be held today (12 January) at 9.30pm local time. The meeting has been called by Prime Minister Giuseppe Conte for the cabinet to approve an economic recovery plan (PNRR) that envisages spending of around EUR 223bn in loans and grants that Italy expects to receive from the EU to help its recovery from the pandemic. Former premier Matteo Renzi, leader of the centrist Italia Viva (IV) party – a junior partner in the ruling coalition – is expected to pull two ministers out of the government before or after (most likely) the meeting. Such a move would trigger a full-blown political crisis as without IV’s backing, PM Conte would not have a working majority in parliament.

Left without a majority, Conte could either offer his resignation to President Sergio Mattarella or go to parliament (for a vote of confidence) to count the votes. The former is the more likely option as, so far, Conte has not secured the support of enough centrist and unaffiliated senators to compensate for the gap left by IV’s 18 senators. Knowing that a defeat in parliament would likely mean the end of his premiership, Conte will opt for the safer option of submitting his resignation to President Mattarella to formalize the crisis and allow the search for a political solution to begin.

Once a formal crisis is triggered, Mattarella will act as a supreme arbiter, leading negotiations with the various parties to find a political solution. Given the ongoing public health and economic crisis, Mattarella will give party leaders a limited window (3-4 days) for talks to take place.

If no compromise is reached, Mattarella will be forced to dissolve parliament and call early elections. However, such an outcome is highly unlikely. The main strength of the current ruling coalition is its own weakness, meaning that both the Five Star Movement (M5S) and the Democratic Party (PD) – the two senior partners in the alliance – are afraid to go to early elections as polls show that the Lega-led right-wing bloc would prevail. Renzi, too, knows that his party would be wiped out if early polls are called. Moreover, a recent constitutional reform has led to a reduction in the number of MPs, which would mean that many current lawmakers would not be re-elected.

The emergence of a broad-based national unity government that could be led by a widely respected figure is also very unlikely. Neither the Lega nor Fratelli d’Italia have any appetite for such a solution. Silvio Berlusconi could be amenable, but his own Forza Italia is already deeply divided, and a governing deal with the PD and the M5S could trigger new defections. Not to mention that many within the M5S would oppose any agreement with Berlusconi.

In our base-case, the coalition parties will draw up a new governing pact and agree on a revised team of ministers, with or without Conte at its helm. A reordering of the existing coalition could also offer both IV and the PD opportunity to secure more leverage in the new cabinet. Under this scenario, it would take around ten days for a new government to emerge and secure the needed confidence vote.

The bottom line is that regardless of Renzi’s next move, Italy will continue to be governed by an executive and by a ruling coalition that are utterly inadequate to tackle the economic challenges the country faces.