Renzi's Authority, Reform Agenda at Risk After Minister Quits

  • Renzi says 'music has changed' for government ministers
  • Premier faces tests in referendums, elections in major cities

The resignation of a key government minister over an alleged conflict of interest is threatening Matteo Renzi’s political authority and his reform agenda as he braces for a series of tests from voters.

The Italian prime minister, who was visiting the U.S., moved quickly to accept Industry Minister Federica Guidi’s offer to step down after the leak of a telephone intercept that prompted accusations that her partner exploited her position in power.

“It’s the worst possible time for something like this to happen to Renzi,” said Francesco Galietti, head of the Rome-based consulting firm Policy Sonar. “Here’s a minister resigning over allegedly favoring people in the energy sector, ahead of a referendum on energy.”

Italians will vote in a referendum on April 17 on drilling for oil and gas within the country’s borders. Opinion polls show that oil drilling, especially offshore, is unpopular but observers say a quorum may not be reached.

Business Affairs

In the intercept, part of court documents seen by Bloomberg News, Guidi allegedly tells businessman Gianluca Gemelli, her partner, that the government will pass legislation helping his business affairs. Gemelli has been placed under investigation in a probe into the illegal disposal of waste from an oil production center in the southern region of Basilicata, the documents say.

Renzi, attending the Nuclear Security Summit in Washington, told reporters on Friday that Guidi had done nothing illegal. “She made a phone call which she was the first to consider inopportune,” Renzi said. “With previous governments, these things didn’t lead to resignations, but now the music has changed.”

Gemelli denied any wrongdoing and said he had asked to clarify his position to the prosecutor leading the probe in an emailed statement on Friday.

Guidi, who has helped spearhead the sale of distinctive brands such as Pirelli and Loro Piana to foreign investors, wrote in an open letter to Renzi that she was “absolutely certain of my good faith and the rightness of my actions,” adding that she believed she must step down “for political reasons.” Last year, Transport Minister Maurizio Lupi resigned after his name was linked to a graft probe involving major infrastructure projects.

Eni SpA, which operates the Val d’Agri facility at the center of the probe, said it’s carrying out internal checks and will cooperate with authorities. The company has suspended production at the 75,000-barrel-a-day plant.

Overall Mood

For Galietti, Renzi’s popularity has leveled out and his reform drive is losing momentum. “It’s hard for Renzi to keep pushing his reform agenda, I think the biggest part of that agenda is behind us,” Galietti said. “Guidi’s resignation makes the overall mood deteriorate.”

After the vote on drilling, Renzi faces municipal elections in many cities including Rome, Milan, Turin and Naples that are likely to take place in June. The prime minister has said he would hold another referendum as early as October on an overhaul of the Senate aimed at ensuring more stable governments -- a change he has called “the mother of all reforms.”

In an opinion survey by the Ixe Institute released on Friday, which was conducted before the controversy over Guidi, 34.1 percent of respondents said they would vote for Renzi’s Democratic Party, down from 40.8 percent in the European Parliament elections of May 2014. That compares with 25.4 percent of people who said they would vote for the Five-Star Movement, the leading opposition party.

Sergio Fabbrini, director of the school of government at Luiss University in Rome, said Renzi had to move fast to defuse the controversy because it dragged in Maria Elena Boschi, the constitutional reforms Minister and his closest ally in the government. In the intercept, Guidi refers to Boschi’s agreement being necessary for an amendment to be submitted in the Senate.

“Boschi is Renzi’s No. 2,” Fabbrini said. “He had to break the connection between her and Guidi.” Opposition parties including the Five-Star Movement called for both Boschi and Renzi to quit.

Adding to Renzi’s woes this week, data out on Friday showed Italy’s unemployment rate rose in February as a discount on social contributions for businesses hiring more workers was being phased out, stripping job creation of a key boost with economic growth failing to accelerate. The jobless rate increased to 11.7 percent from a revised 11.6 percent in January.

Addressing an audience of students at Harvard University on Thursday, Renzi called for “intelligent investments” to promote Italian growth, “not to give money to the friends of the friends.” Hours later, he had little choice but to accept Guidi’s resignation.

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