Renzi Resignation Will Usher in Uncertainty
December 05 2016 - 8:50AM
Dow Jones News
ROME—Italian Prime Minister Matteo Renzi is expected to resign
on Monday afternoon, bringing an end to a government determined to
overhaul the country's sluggish system and opening a period of
political and economic uncertainty.
The 41-year-old will formally inform Italian President Sergio
Mattarella after announcing his decision in the early hours,
following a stinging defeat in a popular referendum on a
constitutional change he had heavily backed.
Mr. Renzi met informally with Mr. Mattarella for about an hour
on Monday, a person close to the situation said, without adding
further details on their conversation.
In the coming days, the president will undertake consultations
with political parties in order to determine how to proceed. Mr.
Mattarella is widely expected to opt for the formation of a
caretaker government to deal with several urgent issues, including
the passage of the 2017 budget and a banking crisis that threatens
to boil over in the coming days.
That government would ferry the country to new elections, which
could be brought forward from their current timetable of spring
2018.
Economy Minister Pier Carlo Padoan and Senate speaker Pietro
Grasso are mooted as possible candidates, although some believe Mr.
Padoan has the edge given the risk that the government may have to
bail out Banca Monte dei Paschi di Siena SpA in the coming
weeks.
Mr. Renzi suffered a decisive rebuke on Sunday, with 59% of
voters rejecting a constitutional change meant to overhaul Italy's
legislature to make lawmaking easier and encourage the creation of
more stable governments.
Mr. Mattarella's consultations could move relatively quickly,
possibly producing the name of a new premier by week's end, which
would be a welcome development given rising pressure on Italy's
banking system.
A new government would then need to win confidence votes in each
of Italy's legislative chambers.
The "no" vote is expected to sap investor appetite for a
critical €5 billion capital increase Monte de Paschi needs to stay
alive.
The economic and financial concerns raise the likelihood that
Mr. Mattarella will chose Mr. Padoan as the new premier. In a
recent interview, Mr. Padoan strongly denied any interest in
leading a new government, but the well-respected economist could do
much to soothe concerns that Monte dei Paschi's troubles will spin
out of control and undermine confidence in other Italian banks.
Meanwhile, Mr. Renzi's exit will likely mean the end of Italy's
efforts to effect the sort of root-and-branch changes the Italian
economy—which has dipped in and out of recession for most of the
last decade—needs.
Indeed, European policy makers and some other government
leaders, including in Germany, viewed with favor Mr. Renzi's
efforts, which included major changes to Italy's rigid labor laws,
cuts in taxes and a plan to reduce the country's notorious
bureaucracy.
A spokesman for German Chancellor Angela Merkel said she had
worked "with great trust" with Mr. Renzi and viewed his resignation
"with regret."
(END) Dow Jones Newswires
December 05, 2016 08:35 ET (13:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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