Gentiloni Keeps Padoan for Finance Chief, Taking Charge in Italy

  • New prime minister to be sworn in at 8 p.m. ceremony in Rome
  • President Mattarella asked Gentiloni to form government Sunday

Paolo Gentiloni will be sworn in as Italian prime minister on Monday evening and keep Pier Carlo Padoan in the key post of finance minister with a brief to fix the country’s ailing banks.

Gentiloni will take the oath of office from President Sergio Mattarella at 8 p.m. in Rome, the head of state’s office said. The new premier said he will also keep his predecessor Matteo Renzi’s ministers in charge of defense, industry and infrastructure. Renzi’s Interior Minister Angelino Alfano will replace Gentiloni as foreign minister.

“The government will start working immediately with all its forces focusing on the problems that need to be solved in the country,” Gentiloni said.

Gentiloni, 62, takes over from a party colleague more than 20 years his junior who saw his ambitions to remake the Italian political system thwarted by a populist backlash and inherits a faltering economy and a banking system weighed down by some 360 billion euros ($380 billion) in bad loans. The outgoing premier, who remains PD leader, signaled that Gentiloni’s government would only be a stop-gap.

“It is obvious that a general election will be held within the next few months,” Renzi told officials from the governing Democratic Party, which he still leads, earlier on Monday.

The leadership of the party, the biggest in parliament, voted unanimously to back Gentiloni, who is set to make his international debut at a European Union summit in Brussels on Thursday.

The new government’s first challenges will be to stabilize the banking system with a recapitalization plan for Banca Monte dei Paschi di Siena SpA and carry out electoral reform.

Monte Paschi is trying to raise 5 billion euros in the next 19 days after the European Central Bank rebuffed its request for an extension and markets were roiled by Renzi’s Dec. 4 defeat in a referendum on constitutional reform. As the odds of attracting fresh investment lengthen, the chance of a government bailout that will impose losses on bondholders is increasing.

At the same time, mainstream parties want to change the electoral law that gives an automatic majority to the leading party in the lower house. They fear a victory of the anti-establishment Five Star Movement, which wants a referendum on Italy’s membership of the euro area.

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