MNI SOURCES: PM's Hold On Italy's Govt Weakens Amid Funds Spat

Italy's Prime Minister Giusseppe Conte is likely to back down from plans to centralise management of EU Covid crisis funds in order to avert a cabinet rebellion, but support for the PM is weakening across the governing coalition and he faces a dangerous start to next year with a chance he could be forced from office, political sources told MNI.

Conte's plans to put himself in charge of a new body created to oversee the spending of an expected EUR209 Billion in NextGenerationEU money have triggered resistance from the centre-left Democratic Party, junior coalition partner to the populist Five-Star Movement. The leader of the small Italia Viva Party, former Prime Minister Matteo Renzi, has also threatened to bring down the prime minister unless he changes course, accusing Conte of acting like "Caesar" and trying to bypass parliament.

In the event Conte is forced out in the next couple of months, coalition parties could either try to reform a government under a different prime minister, or Italy could face talks to form a technocratic administration to guide it through the continuing economic crisis, government and governing party sources told MNI.

"Agreement can be reached. Conte is open to dialogue. We should all take a seat at a table and find common ground," a senior government source, from the Democratic Party, told MNI. While in public Democratic legislators have adopted neutral stances, in private they lean towards Renzi's view.

FIVE-STAR SUPPORT WAVERS

Sources in Five-Star, which is linked to Conte although he is not a member of any party, told MNI that they could withdraw support from the prime minister, who has just won a key vote to approve a reform of the eurozone stability fund, if he becomes too imperious. Foreign Minister Luigi Di Maio, one of the more senior figures of the group, which is in the middle of a complex reorganisation, has not been given a role in overseeing the EU funds, they noted, adding that they think Renzi wants to oust Conte even if he makes concessions on management of the European funds.

According to a draft plan published early this week, Finance Minister Roberto Gualtieri, a Democrat, and Economic Development Minister Stefano Patuanelli, from Five-Star, would report directly to Conte to coordinate a task force of 300 experts from the fields selected for European funding.

An initial victory against Conte's plans, which are meant to counter accusations that Italy has mismanaged European funds in the past, came when the government said that legislation to create the oversight body will be subject to its own vote, and not be bundled in with the 2021 budget as had been originally planned. The budget is heading to be approved before the end of the year, but the vote on managing the European funds may not take place until early in 2021, parliamentary sources said.

The Five-Star sources agreed that Conte is likely to give in and alter his plans, but they added that the prime minister was resisting for the moment because it would appear a humiliating defeat which emphasises his dependence on Renzi.

Italy's political calendar may now be key to Conte's fortunes. If he survives until February, he is likely to see out 2022, because coalition parties would not risk bringing down the government ahead of the beginning of the process to select a new president which starts in July and lasts for six months. Elections cannot be held during that period.