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Friday, March 22, 2013

Italy: Will Bersani have any luck in forming the new government?

While the spotlight has firmly been on Cyprus these last few days, over in Italy centre-left leader Pier Luigi Bersani has just been given a mandate to try and form the new government by President Giorgio Napolitano.

Bersani has been explicitly asked to talk to other political leaders and report back to President Napolitano "as soon as possible" - we assume this will happen at some point next week. Basically, he will have to prove that his government would be supported by a majority in the Senate - the hung upper house of the Italian parliament - before he gets the definitive go-ahead.

So what happens next?
  • Bersani will try to convince the other parties to back his plan for a 'minority government', which would seek parliamentary support on a law-by-law basis. It's going to be difficult. Beppe Grillo's Five-Star Movement doesn't want to do business with anyone, while Silvio Berlusconi is clearly in favour of a proper 'grand coalition' with Bersani - as this could see his party getting several ministerial posts. However, President Napolitano himself has today acknowledged that a 'grand coalition' presents "relevant difficulties".
  • If Bersani does not succeed, he will have to give up his mandate to the President - who will then have to task someone else with forming the new government. This person would probably be someone from outside of traditional politics - that is, someone capable of gathering cross-party parliamentary support as Mario Monti did in November 2011. As we've noted, incumbent Interior Minister Anna Maria Cancellieri and Senate speaker Pietro Grasso are the names doing the rounds in the Italian press.
  • Failing this, the only option left would be new elections. A slightly untimely outcome, given what's happening in Cyprus (think market pressure).
In the meantime, Mario Monti stays on as caretaker Prime Minister - he will leave office only after the new cabinet is sworn in. Keep following us on Twitter @OpenEurope and @LondonerVince to stay on top of events in Italy (and beyond).

1 comment:

Rik said...

The issue in Italy is not so much if they can get a government together but if they can finally start with the structural reforms urgently needed (do the full Monti).
With policies as is like now and in the 'best case' scenario if a government can be formed nothing will change.
Hard to see if either a minority Socialists or a Grand Coalition (including a new Monti) can do that job, you never get it through parliament.
The real Monti could hardly do anything constructive the second half of his 'reign'. Simply as there was no support. He took the gamble and the challenge of the election, probably the 'nice' thing to do and worth the try. But all it did was made more clear that Italy isnot ready for structural reforms.

Also when Grillo comes to power that won't change his economic policies make Hollande look like economic Nobelprize material. It is not going to work only increase deficits and markets will dump it within a few weeks at best.
Unless of course he goes for radical change which will likley end Cypriotic (one big mess).

Anyway Italy is running out of time Like the other PIIGS (excl Ireland). Bail out fatigue is hitting in. Looking at German elections and things like the SNS take over. It is completely unrealistic to assume PIIGS and PIIGSbanks will get a better deal than Dutch banks and its bondholders. Or German taxpayer with half the nett worth will bail out Italian ones (with double the nett worth). Why do you think these reports keep appearing, it is nearly as good as Russian oligarchs.

Difficult to see how only the ECB can hold this fort. There will not be massive shorting as it looks now. But the effect will simply be spread over a longer time ending up in the same situation. And as it looks all the time bought is there to be waisted the end result will be the same. Probably worse as precious time is waisted and debt levels further pumped up. Risk is moved from smart money to local bust banks that are doubling down or local pensionfunds. Nobody (hardly anybody) with a brain is in PIIGS except for trading (no way for longer term investments), they move out en messe with the first real trouble.