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Free AccessMNI: Italy Political Stalemate Deepens, Risks From Early Vote
By Silvia Marchetti
ROME (MNI) - Italy's political crisis deepened Monday after parties failed
to strike a ruling deal, but an early election holds more than an element of
risk. Head of State, President Sergio Mattarella, had urged parties to build a
governing agreement by selecting 'neutral' figures, or Italy could be called to
the ballot boxes as early as July with unknown consequences.
But following an unsuccessful third round of cross-party talks, Mattarella,
acknowledged that the formation of a 'political government' between the Mar 4
election winners was impossible. He called for a cabinet that could govern until
the next election, which could take place either in July or the autumn,
dependant upon further negotiations.
"Mattarella once again appealed to parties' sense of responsibility to
secure stability to the country, but if all attempts have so far failed, it is
highly unlikely that a parliament deal could be struck now with external figures
and experts on whom all political forces could converge," said Andrea Ungari,
professor of political parties history at Rome's LUISS University.
--TECHNOCRAT GOVERNMENT
Democrat officials close to former prime minister Matteo Renzi argued that
the most "appropriate" scenario would be to create a "president's government
made of independent officials with no specific party affiliation".
It would be very similar to the technocrat government put in place by Mario
Monti back in 2011 when Italy teetered on the brink a sovereign debt crisis.
There are two crucial reasons why Italy can't afford to vote again in the
short run, explained one of Renzi's top aides. "We need a majority to fix the
existing electoral law which has created this chaos, while the next 2019 budget
plan needs be approved by October and forwarded to Bruxelles for the green
light."
The new budget must contain future fiscal targets, but above all sufficient
resources to avoid an automatic VAT spike, which would stifle both growth and
consumption rates.
"That's why it is also very likely that the next vote could be extended to
the beginning of next year, in order to solve all pending issues and meet
commitments," said the source.
A new budget law usually clears Italy's parliament by early to
mid-December.
The two leading post-vote forces -- the centre-right coalition led by Lega
party and the 5 Star Movement -- have failed to reach any coalition agreement,
while the Democrats, now in opposition, refuse to join forces with 5 Star.
In what is one of the worst political crisis Italy has so far faced, even
in its long history of unstable governments, all parties have stuck firmly to
their battle-line positions, unwilling to take a step backwards for the sake of
the country.
--JULY VOTE
Sources close to Lega and 5SM said both were pushing for an early second
vote, perhaps as soon as July, confident each could further boost their support.
The outgoing Democrat cabinet of premier Paolo Gentiloni can't prolong its
mandate, however, given their electoral defeat.
The political stalemate however might not spook markets too much, according
to Filippo Taddei, professor of international economics at Bologna's John
Hopkins School of Advanced International Studies (SAIS).
"Economic fundamentals are solid and outweigh critical political factors.
Milan's stock exchange is responding well to the situation and the spread in
yields is staying low. In the short run, there are no major inbuilt instability
risks linked to a potential government void but of course, no country can go on
for an extended period of time without a governing majority," said Taddei.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: MFIBU$,M$E$$$,M$I$$$,M$X$$$,MC$$$$,MI$$$$,MX$$$$,MFX$$$,MGX$$$]
To read the full story
Sign up now for free trial access to this content.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.