Renzi steps in to thwart Italian coalition deal

Matteo Renzi had remained conspicuously silent in the immediate aftermath of the bruising election defeat that populist rivals inflicted on his centre-left Democratic Party (PD) in March.

But this week Italy’s former prime minister lunged back into the limelight, despite having given up the PD’s leadership in the interim.

His mission, which party insiders say he is on the cusp of achieving, is to prevent the one remaining political configuration most likely to give Italy a government in the wake of the tumultuous vote in March – a tie-up between the PD and the anti-establishment Five Star Movement.

"The Koreas are speaking to each other ... so I think Five Star and the PD can too," Renzi quipped in a television interview. But he added, referring to Luigi Di Maio, whose Five Star forces topped the poll in March with 32 per cent, "I could not give my vote of confidence to a Di Maio government."

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As a PD party conclave gathers to give a formal thumbs up or thumbs down to negotiations with Five Star, the chances of a new election to break the deadlock have risen sharply – an outcome that could further increase uncertainty and tension in the euro zone’s third-biggest economy.

The political confusion that has reigned as Italy’s establishment has struggled to respond to an insurgent electoral wave has deepened concern about the country’s sluggish growth, high debt and weak banking system.

"There are only small possibilities left to reach a deal," said Sofia Ventura, a professor of political science at the University of Bologna. "At this point we can say that early elections are increasingly probable."

Five Star has been the sworn enemy of the PD, and of Renzi personally for the past five years, accusing the 43-year-old Florentine of leading an ineffective government that served the interests of big business and European bureaucrats.

But, since formal consultations on a new government began a month ago, the 31-year-old Di Maio has failed to close a deal with the far-right League (formerly Northern League), the other populist party that staged a big advance in the vote.

That immediately switched attention to a possible Five Star-PD coalition.

Irrelevance

Some PD members believe that only by agreeing such a pact and remaining in government can they avoid the kind of tumble into irrelevance suffered by the French Socialists, whose candidate, Benoît Hamon, scored only 6 per cent in last year’s presidential contest.

Although the PD is still Italy’s second-biggest electoral force, scoring 18.7 per cent of the vote in March, its vote has plummeted since the 2014 European elections in which it won 41 per cent.

By the start of this week, the prospect of Five Star-PD negotiations was real enough to trigger Renzi’s intervention, which could put any such tie-up off the agenda.

The former prime minister retains a heavy following among PD rank-and-file MPs and his rejection of any horse-trading with Di Maio appears to have swayed opinion.

"The outcome seems to be set – the PD and Five Star dialogue is already over before it started," says Flavio Arzarello, a senior policy analyst at Reti, a public affairs consultancy in Rome.

Dario Franceschini, the culture minister who is championing a negotiation with Five Star, was incensed. "Renzi has been transformed into Mister No, deserting any collegial discussion and undoing everything his party has tried to build"," he wrote on Twitter.

Di Maio also reacted angrily in a video message. “Instead of apologising to Italians for all the damage done by his government, [Renzi] attacked me and Five Star, shutting the door on any kind of agreement,” he said.

As the PD leadership met on Thursday to consider the situation, Sergio Mattarella, Italy's president, was expected to make his next move to shepherd a government into existence as early as Friday.

Unity government

One possibility would be to offer Matteo Salvini, the League's leader, a chance to try to cobble together a government instead. Another would be to propose a national unity government led by a technocrat, an outcome that insurgent parties could find hard to stomach.

After that, the only remaining alternative would be new elections, probably in the autumn or early 2019.

Investors and policymakers will be left to ponder whether it will be better for Italy to have no government or a populist-led government. But for Renzi and his allies, however, a deal with Five Star was never a palatable option, no matter the alternative.

"We are a centre-left party; they are post ideological and want to cancel the left. They demonised our politics and our leaders, and lynched us in the media," said Alessia Morani, a PD lawmaker opposed to an accord with Di Maio.

“The difference is almost anthropological”. – Copyright The Financial Times Limited 2018