Italy Presidential Election Set to Begin Amid Political Crisis

The Italian parliament meets today to begin the election of a new president. The vote will be closely watched as the new head of state will take the lead in trying to end Italy’s political gridlock after inconclusive elections on Feb. 24-25. Here are some details on how it works.

* When will the new president be elected? -- President Giorgio Napolitano’s seven-year term expires on May 15. Members of Parliament and 58 regional delegates will begin voting for his successor today. The procedure can take several days as just two rounds of voting are held each day. While some presidents, such as Francesco Cossiga in 1985, were chosen in one day, the election of Giovanni Leone in 1971 took 23 rounds of voting.

* How does the vote work? -- The presidential election is held in Parliament in a roll call vote of more than 1,000 lawmakers and regional officials. The ballot is secret. To win in the first three rounds a candidate must secure two-thirds, or 672, of as many as 1,007 potential votes. From the fourth round, an absolute majority of 504 electors is required. Two rounds of votes will be held today, with the first one starting at 10 a.m. local time.

* How are the electors split? -- Democratic Party leader Pier Luigi Bersani’s coalition has 496 electors, combining members of parliament and regional delegates. Former premier Silvio Berlusconi’s bloc and its ally the Northern League have 270. Beppe Grillo’s Five Star Movement has 162 electors while caretaker Prime Minister Mario Monti’s centrist bloc has 70. Bersani’s bloc is 8 votes shy of a simple majority, which is enough to elect the president from the fourth round. Bersani could then need to reach out to Monti’s electors or agree on a candidate with Grillo. Bersani and Berlusconi’s blocs together have enough votes to elect the new president from the first round.

* What it the role of Italy’s president -- The president is a largely ceremonial figure. He’s the head of the armed force, and can also reject laws that he considers unconstitutional. Those powers are enhanced at times of political crisis as the president also has the power to dissolve parliament and designate prime minister candidates.

* What are the positions of the main parties? -- Berlusconi has reiterated his People of Liberty party should have a decisive role in choosing the next president, while signaling he would support a PD presidential candidate if Bersani’s party agrees to form a broad coalition government. Bersani has so far ruled out an alliance with Berlusconi. -- Five Star said it will vote for professor of law Stefano Rodota. Grillo has urged the PD to support Five Star’s candidates, offering to restart alliance talks. -- Bersani told his lawmakers yesterday that former Senate speaker Franco Marini is the candidate with the broadest support among all political parties. Marini may face opposition from some Democratic Party dissenters. Berlusconi agreed on Marini as presidential candidate, according to a Twitter message by his staff. Other potential candidates had included former Prime Minister Giuliano Amato and ex-premier Massimo D’Alema.

* What’s going to happen once the new president is in place? -- The new president will probably hold another round of consultations with political parties before deciding whether to give a mandate to someone to form a government, install a transitional government or leave Monti’s caretaker administration in power to carry out certain needed reforms before calling a new vote. He can also decide to dissolve parliament immediately and call new elections, which Napolitano couldn’t do at the end of his mandate.

* What are market expectations? -- A scenario in which the president is elected in the first three ballots would signal that parties have found common ground on how to manage the post-election impasse, paving the way for a reform of the election law and new elections early next year, Barclays Economist Fabio Fois said in a note April 16. If that’s not the case, the risk of political impasse may remain elevated and the newly elected president may call elections in the third quarter this year, he said. -- A “likely deal” on the new president will probably be part of a broader agreement between Bersani and Berlusconi for a new government, Gianluca Ziglio, fixed-income strategist at Sunrise Brokers, wrote in a note to clients April 12. -- Peter Ceretti, a New-York-based analyst for Eurasia Group, assigns a 60 percent probability to the election of a figure acceptable to the two main forces in parliament and a 40 percent chance to a candidate unacceptable to the PDL. “If the PD and PDL can agree on a president, cooperation on forming a government and moving ahead with an agreed policy agenda is much more likely,” while if a divisive president is elected political gridlock will continue, he said. -- The election of the new president “might provide some volatility” in Italian government bonds, Annalisa Piazza, a fixed- income analyst at Newedge Group in London, said in a note published yesterday. News reports of a possible agreement between PD and PDL on Amato seem to have been welcomed by the market “as he is seen as the best candidate to lead to a smooth transition ahead of the new elections,” Piazza said.

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