Conte from Italy struggles to retain power after Junior Ally leaves

Italian Prime Minister Giuseppe Conte is struggling to retain power after a junior partner in his coalition has withdrawn, robbing him of a majority in parliament.

Former Prime Minister Matteo Renzi said on Wednesday night that the ministers of his Italy Alive party would resign from the cabinet, attacking Conte for not doing enough to resolve the country’s problems. Although the party is small, Conte trusted it to maintain its majority. Conte can seek a vote of confidence in parliament next week, newspapers including la Repubblica reported.

Renzi’s decision sparks a government crisis that can last for days or even weeks, and has no clear solution in sight. Before making any other move, Conte will have to formally accept the resignations of Renzi’s two ministers.

Missing majority

Premier Giuseppe Conte needs at least 158 ​​senators to remain in power

Still, Conte has several ways to stay in power, or to return later as prime minister:

• He could try to win a vote of confidence with the support of parties inside and outside the current government and non-affiliated lawmakers. That may mean having forces like Silvio Berlusconi’s Forza Italia party to keep the government in power. Conte agreed with President Sergio Mattarella to avoid a confidence measure until new deficit and relief legislation is passed, la Repubblica reported.
• He could resign, which would trigger a new round of negotiations between the parties. This could eventually lead to a new administration headed by Conte.
• President Mattarella, whose mainly ceremonial role also includes responsibilities for safeguarding political stability, could install an interim administration to administer the government until the next elections. A placeholder administration could give Conte time to organize a future election campaign.
• A broad alliance including coalition parties and possibly center-right forces could also try to forge a government under a figure like former European Central Bank president Mario Draghi.
• Instant elections, while a risk, seem to be only a remote possibility for now. The president – who has the authority to call a new vote – is reluctant to see the country vote during the pandemic. “A quick vote, the worst case scenario for investors, remains unlikely at this stage,” said Lorenzo Pregliasco, political analyst at YouTrend.

From Italy ten years yields increased 1 basis point to 0.61%, with the spread for German debt increasing to 113 basis points. Any drop in Italian bonds is an opportunity to enter the market, as early elections are unlikely, given the “incentive” to manage European Union recovery money and the tight schedule for organizing a vote, Citigroup strategists led by Aman Bansal said.

‘Act of courage’

Withdrawing at such a crucial time for the country amounts to “an act of courage,” Renzi told a news conference in Rome. Conte’s government has not done enough to solve the problems of infrastructure education, as has the virus, the former premier said.

The timing of the crisis for Conte could hardly be worse, with Italy battling the worsening pandemic and a recession. At a cabinet meeting scheduled for Thursday, Conte is expected to sign a plan to increase the country’s deficit by around 24 billion euros ($ 29 billion), while overnight his government extended its emergency powers to combat the pandemic until April 30.

Unfinished Business

The crisis could not come at the worst time for Italy. Here is what is at stake if the Conte government loses its support in parliament.

Renzi had been increasing pressure on Conte since the end of last year, criticizing the prime minister’s plans to manage and spend EU bailout funds. Renzi says the plan has been fine-tuned according to his demands, but he has insisted on more conditions, including that Italy take advantage of a European Stability Mechanism credit line for health spending.

“The real question is, should we spend more money on health with ESM?” Renzi said after his announcement on Wednesday.

– With the help of Marco Bertacche, Neil Chatterjee and Samuel Dodge

(Updates with titles in the sixth paragraph.)