Renzi Battles to Save Legacy, Tackle Divisions After Defeat

Updated on
  • Premier to pose options to Democratic Party after losing vote
  • Budget law due in Senate before Renzi quits as premier

What You Need to Know About Italy's Anti-EU Movement

On the eve of his resignation, Italian Prime Minister Matteo Renzi will seek to rally his divided party and map out its future strategy in the aftermath of a crushing referendum defeat.

As Renzi addresses senior members of the Democratic Party on Wednesday afternoon, discussing options such as a grand coalition, the Senate will hold a confidence vote to clear the final hurdle of the 2017 budget -- a step President Sergio Mattarella insisted on before Renzi formally steps down. The lower house has already approved the budget.

In his last hours in power, the 41-year-old premier will be looking into ways to preserve his political legacy while fielding attacks by dissidents who had campaigned openly for a ‘No’ vote in Sunday’s constitutional referendum. Those critics are now emboldened by the fact that Italians rejected Renzi’s signature reform by an unexpectedly wide margin.

“I expect Renzi will say that he remains leader of the party, which is important because the opposite would be a big instability factor for forming a new government,” said Roberto D’Alimonte, a political science professor at Rome’s Luiss University who helped draft the electoral law for the lower house.

Early Elections

D’Alimonte said that Renzi would like elections early next year but that he must first wait for a verdict by one of Italy’s highest courts on the constitutionality of the Italicum, as the new procedure for choosing the Chamber of Deputies is known. The Constitutional Court said earlier on Tuesday that it would review the law on Jan. 24.
Mainstream parties are itching to change the law because in its present form it gives an automatic majority to the leading party. They fear the winner could be the anti-establishment Five Star Movement, which wants a referendum on whether to leave euro.

The head of state is likely to start a round of talks as early as Thursday, testing the waters for a successor to Renzi who can muster enough support to win a vote of confidence. If Mattarella fails in his search, the euro area’s third-biggest economy would see snap polls.

Mattarella is said to oppose snap elections before either a new electoral law is approved or the current one is reviewed by the Constitutional Court, Corriere della Sera reported on Wednesday.

Market reaction to the political instability has so far been limited. The question is how much will prolonged uncertainty weigh on Italy’s troubled lenders, first and foremost Monte dei Paschi di Siena SpA which is seeking to complete a 5 billion-euro ($5.4 billion) capital increase.

Monte Paschi

“The fact that markets have not reacted particularly negatively to the referendum decision leave us hopeful that the recapitalization plan for Monte Paschi can go through,” Yoram Gutgeld, economic adviser to Renzi, told Bloomberg Television’s Francine Lacqua.

Not everyone shares that optimism, starting with German Finance Minister Wolfgang Schaeuble. 

“Of course we are worried,” he told reporters in Brussels after a two-day meeting with European Union counterparts. “The market reaction doesn’t mean that the problem is solved. Market reactions are not the ultimate accomplishment in wisdom.”

One of Schaueble’s peers, Italian Finance Minister Pier Carlo Padoan, is the frontrunner to succeed Renzi at the head of Italy’s 64th government since World War II. He would likely serve as premier and keep his current job, as Mario Monti did in the first months of his premiership in 2011. Others contenders include Transport Minister Graziano Delrio, Culture Minister Dario Franceschini and senate Speaker Pietro Grasso.

As things stand, general elections are not due until early 2018. Five Star, which is virtually tied with Renzi’s party in opinion polls, is eager for Italians to cast their vote much sooner to capitalize on its momentum. Whether that will be the case will become clear in coming weeks.

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