The Italian Count struggles to maintain power after the loss of Junior Ally

Italian Prime Minister Giuseppe Conte is fighting for power after a minor member of his coalition withdrew, stealing a majority in parliament.

Former Prime Minister Matteo Renzi said Wednesday night that ministers from his Italy Alive party would leave the cabinet, attacking Conte for not doing enough to address the country’s problems. Although the party is small, Conte relied on it to maintain his majority. Conte may call for a vote of confidence in parliament next week, newspapers included reported the Republic.

Renzi’s decision provokes a government crisis that could last for days or even weeks and has no clear solution in sight. Before making any further moves, Conte will have to formally accept the resignations of Renzi’s two ministers.

However, Conte has several ways to stay in power or to return later as prime minister:

• It could try to win a vote of confidence with the support of parties inside and outside the current government and unaffiliated lawmakers. This could mean relying on forces like Silvio Berlusconi’s Forza Italia party to keep the government in power. Conte has agreed with President Sergio Mattarella to avoid a confidence-building measure until new legislation on relief and deficit is passed, the Repubblica has reported.
• He could step down, prompting a new round of talks between the parties. This could end up leading to a new administration led by Conte.
• President Mattarella, whose primarily ceremonial role also includes responsibilities to safeguard political stability, could install an interim administration to run the government until possible elections. A placeholder administration could give Conte time to organize a future election campaign.
• A broad alliance that includes coalition parties and possibly center-right forces could also try to forge a government under a figure like former European Central Bank President Mario Draghi.
• Fast elections, while a risk, seem to be just a remote possibility for now. The president, who has the authority to call a new vote, is said to be reluctant to see the country vote during the pandemic. “An instant vote, the worst-case scenario for investors, is still unlikely at this stage,” said Lorenzo Pregliasco, a political analyst at YouTrend.

Of Italy ten years the yield rose one basis point to 0.61%, with a spread of German debt widened to 113 basis points. Any fall in Italian bonds is an opportunity to enter the market, as quick elections are unlikely to take place given the “incentive” to manage the European Union’s recovery money and the tight timetable for holding a vote, Citigroup strategists led by Aman Bansal said.

“Act of Courage”

Retiring at such a crucial time for the country amounts to “an act of courage,” Renzi said at a news conference in Rome. The Conte government has not done enough to solve problems from education to infrastructure as well as the virus, the former minister said.

The timing of the crisis for Conte could hardly be worse, with Italy struggling with a worsening pandemic and a recession. At a cabinet meeting scheduled for Thursday, Conte will have to sign a plan to expand the country’s deficit by about 24 billion euros ($ 29 billion), while overnight his government extended its emergency powers. to fight the pandemic until April 30th.

Renzi had been putting pressure on Conte since late last year, shattering the prime minister’s plans to manage and spend EU bailout funds. Renzi says the plan has improved after its demands, but has been insisting on other conditions, including Italy taking advantage of a line of credit from the European Stability Mechanism for health spending.

“The real problem is, should we spend more money on health with ESM?” Renzi said after his announcement on Wednesday.

– With the assistance of Marco Bertacche, Neil Chatterjee and Samuel Dodge

(Updates with vouchers in the sixth paragraph.)