Italy Rivalries Threaten to Undo Letta Coalition

Italian Prime Minister Enrico Letta won his first parliamentary showdown today by appeasing adversaries and calling for loyalty from his long-time allies.

Letta appeared in the Senate today and successfully defended Interior Minister Angelino Alfano against a no-confidence vote. In his speech, Letta rebuffed criticism from his own Democratic Party, or PD, and said Alfano, who belongs to a rival political group, deserves no blame for the mistaken expulsion from Italy of a Kazakh woman and her daughter. Letta sought to reassure the PD that he is in control.

“I wouldn’t want you to mistake for weakness what, with maybe an antiquated flavor, is called good manners,” he said.

Letta, 46, is faced with growing uneasiness within the PD over the makeshift coalition of rival parties he assembled three months ago. The alliance threw the PD, the parliament’s biggest force, into partnership with its traditional adversary, Silvio Berlusconi, and the People of Liberty party he leads with Alfano. PD Chief Whip Luigi Zanda said before the vote the party would support Alfano in order to avoid a government crisis.

The no-confidence vote was defeated 226-55, with 13 abstentions. At least four PD Senators, including Laura Puppato, who spoke in the chamber during the debate, didn’t cast a vote.

The pressure is building as Letta’s association with People of Liberty, or PDL, leaves him exposed to a leadership challenge from within the PD. Prior to the campaign against Alfano, Letta was criticized for declining to confront Berlusconi over his growing legal problems. The 76-year-old billionaire former premier voted in the Senate in Rome today as his lawyers in Naples battled an indictment request by prosecutors who have accused Berlusconi of bribery.

Political Death

“If political death comes to the government at some point, it’s definitely going to come from the PD,” said Francesco Galietti, founder of Rome-based Policy Sonar.

Letta won support yesterday from President Giorgio Napolitano, who urged disgruntled lawmakers to maintain backing for the government. Political instability, the 88-year-old head of state said, could weaken Italian sovereign debt, raising borrowing costs. The government is struggling to carry out a promised plan to abolish an unpopular property tax and to avoid a value-added tax increase after pledging to bring the country’s deficit below 3 percent of gross domestic product.

Italian 10-year yields have risen about 70 basis points since a 2 1/2-year low on May 2 after Letta took charge. The yield was down 1 basis point to 4.40 percent at 3:33 p.m. in Rome.

Cabinet Reshuffle

Alfano, also the deputy premier, may be replaced as interior minister in a cabinet reshuffle in the fall, Corriere della Sera reported today, without saying where it got the information.

Berlusconi remains one of the government’s biggest parliamentary supporters even after he was convicted in Milan last month of abuse of power and engaging a minor in prostitution. Prosecutors in Naples allege he bribed a senator to help topple ex-Prime Minister Romano Prodi in 2008 and are seeking the indictment at a hearing today. Prodi was the last member of the PD bloc to hold the premiership until Letta.

Berlusconi, who has also been convicted in separate tax-fraud and wiretapping cases, has denied wrongdoing, saying the charges against him amount to political persecution. He is appealing all convictions. Sentences in Italy can’t be enforced until all appeals are exhausted.

Leadership Challenge

The PD as the biggest danger to Letta demonstrates how the broad coalition has turned Italian politics upside down. Letta spent most of his career with allies in the PD as they opposed Berlusconi’s unprecedented run of political success in the last 20 years.

An intraparty challenge to Letta is coming from Matteo Renzi, the 38-year-old mayor of Florence who last year was identified by pollster EMG as Italy’s most popular politician. At a PD rally in Carpi in central Italy this week, Renzi said he didn’t think the alliance with Berlusconi’s People of Liberty party could last much longer, Ansa reported.

“Should Renzi take the leadership within the PD, the left may decide to capitalize on his broad consensus and push for early elections,” said Nicola Marinelli, who oversees $180 million at Glendevon King Asset Management in London.

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