How many wise men does it take to fix Italian politics?

Markets remain deceptively calm as uncertainty rumbles on in Italy. Italian President Giorgio Napolitano has created two commissions, now known as the ‘wise-men’, which will seek to find some common ground between the various political parties in Italy and therefore, potentially, provide a basis for a coalition government. Although, they only have 8 to 10 days to do so.

The first committee with look at economic, social and European affairs, while the second will focus on institutional (in particular electoral) reform. Napolitano has been at pains to stress that the committees will not determine an agenda for a new government or set any policies; they will simply look to facilitate fresh dialogue and find areas which the parties can work together on.

So where does each party stand now? What are the prospects of finding some ground to build a coalition upon?

Pier Luigi Bersani and his centre-left group:

• Bersani has continuously ruled out entering a grand coalition with Berlusconi’s centre-right group and yesterday reiterated this position, adding that such a government would be paralysed.
• That said, Bersani has warned that new elections would be “disastrous”. Having failed to form a viable government after being given the mandate by the President it is unclear exactly what Bersani wants, particularly with his options dwindling quickly.
• An SWG poll suggests Bersani’s party’s trust in him has fallen to 30% while behind the scenes trust in Florence Mayor Matteo Renzi has reached 55% (+6%), while 66% of Italians say they would like him to guide the centre left instead.

Silvio Berlusconi and his centre-right group:

• By some polls this group is now ahead. In any case they remain a formidable force and are playing their hand by insisting on a grand coalition or fresh elections.
• Yesterday, Berlusconi’s party accused the centre left of pandering to “factional interests” rather than needs of the country.

Beppe Grillo and his Five Star Movement:

• Has ruled out taking part in a coalition government. Has also ruled out providing a formal backing to a technocratic government. May consider providing support to a government on certain issues but remains unclear exactly what conditions would be needed for this.
• Has been critical of the ‘wise-men’ calling them "domestic carers for democracy".

So, the groups remain split along some fairly fundamental lines. Some elements of consensus may be found but it remains unlikely that these will be enough to form a workable long term coalition. A more likely outcome remains a grand coalition being put in place to push through some electoral reform ahead of new elections. A similar scenario with another technocratic government is also possible.

At the same time the new Presidential elections loom large. Voting begins on the 18 April with Napolitano’s term officially expiring on 15 May. This is likely to lead to further delays in forming a government. Napolitano looks set to pass the problem onto his successor, with many criticising the formation of the working groups as a way to eat up time. He can also not call new elections, meaning that the new President would be responsible for doing so – realistically then they cannot take place until June.

Another month or two of uncertainty seems likely in Italy, and any certainty may only come with new elections being announced (itself a source of further uncertainty). Markets have been calm so far, but with the acute problems in Cyprus dying down the spotlight could once again turn on Italy.

Italy: Bersani failing to form government wouldn't automatically mean new elections

There were rumours of a further postponement until Good Friday, but Italy's centre-left leader Pier Luigi Bersani has confirmed he will meet President Giorgio Napolitano tomorrow and report on the outcome of coalition talks with other political parties. The truth is talks haven't gone particularly well. At the moment, Bersani doesn't seem to have the numbers to win a preliminary vote of confidence in the Italian Senate - absent which the new government wouldn't be allowed to enter office.  

Clearly, Bersani's failure to form a government would make snap elections more likely. But there is still some room left for negotiations. For the moment, we have tried to imagine the content of the meeting between Bersani and Napolitano (providing no eleventh-hour U-turns occur).

Scenario 1: Bersani admits he doesn't have the numbers and asks for more time to strike a deal 
This is fully possible, and it shouldn't be a big problem for Napolitano to give Bersani more time for a second round of talks. However, it is unclear how much an extension of talks would change if none of the big parties moves from its current position.

Scenario 2: Bersani admits he doesn't have the numbers, but asks to be sworn in anyway
Bersani's reasoning here would be that, when the time to vote the confidence to the new government comes, some Senators (mainly from the Five-Star Movement) would break ranks and back him. This is a huge gamble, though. At the moment, even assuming that Monti's Senators all vote the confidence to the new government, Bersani would still need at least 15 Senators to reach the minimum required majority of 160.

As such, Napolitano may not want to run the risk - and here is why. When a new government is sworn in, it must win a vote of confidence in both houses of the Italian parliament within ten days from the oath before it can enter office. If it fails to do so, it stays on as caretaker while the Italian President decides what to do next. But Napolitano is quite keen to keep Monti as caretaker instead - so he will probably only agree to swear in a government which can realistically win the vote of confidence.

A boring (but necessary) caveat before we move on to Scenario 3. It is possible for Italian Senators to leave the chamber before a vote, so that they are 'absent' when the roll is called. Absent Senators don't count, meaning that the required majority goes down. Now, Lega Nord leader Roberto Maroni has hinted at the possibility of his and Berlusconi's Senators leaving the chamber en bloc before the key confidence vote to a hypothetical new centre-left government - allowing Bersani to win the vote.

Of course, Maroni made clear this could happen only if "certain conditions" were met - including an agreement to elect a man close to the centre-right as the next Italian President next month. But this could potentially be a way out of the impasse.

Scenario 3: Bersani throws in the towel and hands his mandate back to President Napolitano
This wouldn't automatically mean new elections - which, in any case, can only be called by the new Italian President when he enters office in mid-May. Napolitano would have to start a new round of talks and then decide what to do. As we explained in previous blog posts, the most likely outcome would be the Italian President proposing a temporary 'national unity government'.

The new cabinet would be led by someone from outside of 'traditional' party politics (the word 'technocrat' seems to have gone out of favour in Italy these days) - but the ministers could indeed come from political parties. It is unclear whether Berlusconi's party would grant its support, but this solution may have some chances of winning the Five-Star Movement's backing. This 'national unity government' would pursue a clearly limited agenda, and pave the way for early elections - perhaps as early as next year, but with a new electoral law.

It's all very much up in the air in Italy at the moment, but in case of a definitive breakdown of talks everyone will suddenly be reminded of which country should be the eurozone's real concern.  

Italian elections: What happens next?

In the flash analysis we published this morning looking at the results of the Italian elections and the various complexities involved in the country's political system. Here is a brief timeline of what will happen next.

15 March: First seating of the Italian parliament (both chambers).

By 20 March: The speakers of both chambers should have been elected.

After 20 March: Italian President Giorgio Napolitano starts official consultations on the formation of the new government. The President usually talks to the leaders of the political groups in the Italian parliament and the speakers of the two chambers. Before that, though, political parties will talk to each other so we may already get a clearer idea (or not) of possible alliances. Bersani is likely to be the first asked to form the new government, as his coalition holds a majority in the lower house.

15 April: Procedures for the election of the new Italian President are due to start (unless he decides to step down earlier, see below). 15 May: Mandate of Italian President expires.