Napolitano Opens Consultations to Form Italian Government

Photographer: Franco Origlia/Getty Images

Giorgio Napolitano, Italy's newly re-elected president, center, speaks as Pietro Grasso, president of senate, right, and Laura Boldrini, president of the chamber of deputies, listen during a joint session of parliament at Palazzo Montecitorio in Rome on April 22, 2013. Close

Giorgio Napolitano, Italy's newly re-elected president, center, speaks as Pietro... Read More

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Photographer: Franco Origlia/Getty Images

Giorgio Napolitano, Italy's newly re-elected president, center, speaks as Pietro Grasso, president of senate, right, and Laura Boldrini, president of the chamber of deputies, listen during a joint session of parliament at Palazzo Montecitorio in Rome on April 22, 2013.

Italian President Giorgio Napolitano, strengthened by his reappointment yesterday, started a new round of consultations aimed at forging consensus for a government.

“We can no longer, in any way, shirk the responsibility of proposing practical solutions and timely decisions for reforms that are immediately needed for the survival and progress of Italian democracy and society,” Napolitano, 87, said in a speech to Parliament in Rome after his swearing-in.

Napolitano began the talks by meeting the heads of both chambers of Parliament starting at 10:30 and ends the day with the three biggest parties -- Five Star Movement, People of Liberty and the Democratic Party -- beginning at 5:30 p.m.

Napolitano will probably find political parties more open to compromise than last month, when his first round of talks after inconclusive elections failed to yield results. The Democratic Party and Former Prime Minister Silvio Berlusconi’s People of Liberty set the stage on April 20 for a possible coalition government by coming together to give Napolitano a second seven-year term.

Grand Coalition

“We think President Napolitano’s re-election is strongly tied up with the formation of a grand coalition,” Fabio Fois, an economist with Barclays Plc, said in an April 21 research report. “This should reinforce the resilience of the Italian government securities.”

Yields on Italian two-year bonds fell to a record-low of 1.1405 percent at 1:OO p.m. in Rome, while the 10-year rate dropped below 4 percent for the first time since November 2010.

“While the initial market reaction has been positive, we view the outcome as a temporary fix,” Citigroup Inc. analysts including Mauro Baragiola wrote in an e-mail yesterday. “It buys some time and reduces the level of political risk in the short term, but we fear the enthusiasm may not last long, as Italy remains in a dangerous deadlock with few politically strong and respected men behind Napolitano.”

A deal would relieve Prime Minister Mario Monti of his caretaker role and give Italy the parliamentary majority it needs to pass economic stimulus measures and shield the country from bond-market speculation. The Italian Parliament has been deadlocked since elections Feb. 24-25 split the Senate into three blocs making it hard to respond to the country’s longest recession in more than two years.

Recession, Debt

The economy has contracted for eight straight quarters and the government forecasts it will shrink 1.3 percent this year. Unemployment has climbed to near a 20-year high of almost 12 percent and the country’s debt is set to reach a record 130 percent of gross domestic produce, second in the euro region to Greece.

Napolitano may ask former Prime Minister Giuliano Amato to lead a government, with Angelino Alfano of People of Liberty and Enrico Letta of the Democratic Party as his deputies, newspaper Corriere della Sera reported. Another option would be Letta as premier with Alfano as his deputy, Corriere said.

Allies of Florence Mayor Matteo Renzi within the Democratic Party will push today for the 37-year-old to become its candidate for prime minister when the party meets to today to choose a new leader, lawmaker Matteo Orfini said yesterday.

The political impasse eased on April 19 with the resignation of Democratic Party General Secretary Pier Luigi Bersani, who had shunned Berlusconi’s offer of a coalition government. Bersani, who won a majority in the Chamber of Deputies in the February election, made good on his pledge to resign after Napolitano’s re-election.

The improved relations between the Democratic Party and People of Liberty may leave Beppe Grillo’s Five Star Movement, the third-biggest parliamentary force, in opposition. Grillo, an ex-comic and anti-establishment crusader, has said the re- election of Napolitano to an unprecedented second-term was a “coup.”

To contact the reporter on this story: Andrew Frye in Rome at afrye@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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