MNI EXCLUSIVE: Italy's Government Faces January Upheaval

Attempts by Italian Prime Minister Giuseppe Conte to overcome a political squabble over tens of billions of euros in emergency European Covid funds have been only partially successful, and political sources told MNI a walk-out by the small Italia Viva party could still bring down his government in January.

Italia Viva leader Matteo Renzi is threatening to ask his party's two ministers to resign in weeks, which would wreck the governing coalition's majority, potentially forcing Italy's head of state, President Sergio Matarella, to consult with all parties in parliament as he decides whether to keep Conte as prime minister.

Elections, though, remain only an outside possibility, and officials from the coalition's main partners, the populist Five-Stars Movement and the centre-left Democratic Party, say they would seek to stay in government if Conte goes. While Renzi has floated an alliance with Silvio Berlusconi's Forza Italia, this would be difficult for the other parties to accept. Nor have coalition parties made approaches to other possible partners on the right, officials said.

Renzi, a former prime minister himself, wants more of a say in the use of a promised EUR209 Billion in NextGenerationEU money. A deal at the moment is looking "difficult", Italia Viva sources present at a meeting between Conte and Renzi told MNI, and Five Stars and Democratic officials were also pessimistic.

Facing opposition not only from Italia Viva but also from Five Stars and the Democrats, Conte has already watered down his early plans to personally administer the aid money, which he had intended as a counter to accusations of mismanagement of European funds by Italian governments in the past.

CABINET RESHUFFLE

Conte has also opened the door to a possible cabinet reshuffle in early 2021.

But, while the two big parties have been placated, Renzi wants Conte to allow regional governments and opposition parties a role in overseeing the emergency spending, as well as more transparency on projects to be selected for financing. In addition, he demands that Italy apply for a EUR36 billion credit line from the European Stability Mechanism to overhaul the country's health system, the sources said.

Five Stars and Democratic officials told MNI it was unwise to threaten Conte, who is not a member of any party but has links to the populists. The prime minister is popular among voters following his performance during the Covid pandemic, noted Democratic official Matteo Ricci, who served as his party's vice president at a time when Renzi was still not only a member but its leader.

"[Trying to replace Conte] could be dangerous. People would not understand it and there is no guarantee that what would come afterwards would be better," Ricci said.

BRIEF TRUCE

Renzi is also widely distrusted by other parties, officials noted, pointing to speculation that the former prime minister, whose popularity at home has waned, is looking to become foreign or defence minister as a stepping stone to a new career in NATO or the European Union.

"It's difficult to tell what he really thinks or wants," said Ricci.

For the moment, the announcement of tougher restrictions to deal with an upsurge in Covid cases and a budget vote before the end of the year should permit a period of truce between Conte and Renzi. But this well end in January, when Conte is due to provide the coalition partners with his plans for the government for the rest of the legislative period, and when parliament will also vote on his proposal for managing the European funds.

Italia Viva's Senator Donatella Conzatti said the European aid will shape Italy for decades and a thorough debate is required.

"Italy's huge debt won't be sustainable without a strong growth. We can only reach it if we use them well," she told MNI, referring to the NextGen funds.