The growing tensions between Italian Prime Minister Enrico Letta (and his fragile coalition) and Matteo Renzi – the head of parliament’s largest (center-left Democratic) party are intensifying this morning. Calls for Letta’s resignation, sparked by a junior coalition party head “hoping he was ready to step down,” have escalated into more open speculation that the Italian government could collapse within days. Following the failure today of a ‘strategy meeting’ with center-right coalition partners, Renzi’s pro-job-creation and electoral law reforms agenda is gaining consensus. While Letta has stated he will move ahead with his government (and address the public later today), Renzi warned, via Twitter, that he will talk tomorrow afternoon on the way forward.
An old-fashioned power struggle between Enrico Letta, an Italian prime minister heading a fragile coalition, and Matteo Renzi, the new reformist leader of their centre-left Democratic party, has exploded into the open, triggering intense speculation that the country could have a new government in a matter of days.
Mr Letta, who came to office last April after elections a year ago resulted in a hung parliament, has dismissed reports that he intended to resign.
The new pact discussions that were promised have failed…
*ITALY PM LETTA, RENZI FAILED TO REACH ACCORD ON STRATEGY: ANSA
Ansa says positions of PD Chief Renzi, Italy PM remain distant.
“I don’t think that everyone pushing for a hand from Letta to Renzi are motivated by good intentions. Some of them are just looking for a way to burn Matteo,” Debora Serracchiani, governor of the Friuli region and a close ally of Mr Renzi, told La Repubblica, a centre-left daily.
But then damage control kicked in…
*LETTA, RENZI MEETING WAS POSITIVE: ANSA CITING PD OFFICIALS
*RENZI SAYS HE WON’T SPEAK BEFORE 3PM TMRW LOCAL TIME
*LETTA WILL SAY THAT HE INTENDS TO MOVE AHEAD WITH GOVT: ANSA
What happens next…
Giorgio Napolitano, the 88-year-old head of state with constitutional powers to dissolve parliament and nominate a prime minister, could ask Mr Renzi to form a new government – possibly as early as this weekend – rather than call snap elections.
Mr Napolitano met Mr Renzi for two hours on Monday night and then Mr Letta on Tuesday morning. According to media reports, Mr Napolitano expressed his opposition to calling elections – in part because parliament is in the midst of debating a new electoral law – and discussed the possibility of Mr Renzi taking the helm.
“With Renzi we would be at the third prime minister who has not been appointed through a people’s vote. It can once be about emergency, or a gun’s to one head . . . but nobody believes it any more when it’s three times in a row,” Mr Brunetta said, calling for elections.
But markets don’t care…
Italy’s chronic political instability has been an impediment to moving ahead with economic reforms, deeply troubling the European Commission and the country’s eurozone partners. But in contrast to the events of 2011, the country’s complex power struggles have been largely ignored by financial markets.
The reaction by investors in Italy was relatively muted on Wednesday morning in reaction to the political events.
In fact, at +4.75%, the Italian stock market is among the best in Europe this year as Italian bond yields press new 8 year lows. Get back to work Mr. Draghi.